Julian Knight: The state pension kiss of life is followed by the kiss of death

The state pension turned 100 last week. When introduced by David Lloyd George, the benefit of five shillings a week was available only to people over 70. In time, though, the age of entitlement fell and the state pension grew into the cornerstone of many Britons' retirement.

But in 1980, with government finances near bankruptcy, Margaret Thatcher ended the link between the state pension and earnings; it was now to increase in line with prices. In effect, it was being left to wither on the vine; we were all meant to save privately.

Now, however, Labour is overhauling the state system and the earnings link will be back in a few years – although, ironically, earnings are rising more slowly than prices at the moment. But in return people will have to wait until they're 68 for payday.

All sensible stuff but the Government's plans to get us to save alongside the state pension into personal accounts have a big gaping hole in them.

The problem is that many of those who contribute to the accounts will only build up a pension pot big enough to bar them from claiming state benefits such as the pension credit. In other words, they will be in the same position whether they have personal accounts or not. Ministers have been told they're storing up trouble, but they won't listen.

The system has only to be tweaked to make it work – far less of a leap of the imagination than that made by Lloyd George.

Victoria values

Liverpool Victoria friendly society (or LV=, as it now likes to market itself) has been around even longer than the state pension – 165 years. But in that time there probably hasn't been as shameful an episode as that seen last week. The banking arm of LV= was fined £840,000 by the Financial Services Authority for among other things pressuring customers into taking out payment protection insurance on personal loans.

What's really sad about this latest mis-selling scandal is that it's a friendly society involved (albeit one worth a few billion quid). These are supposed to be the good guys of the financial industry. They were started to help poor people save for a burial and have been run for the benefit of members ever since – not a shareholder in sight.

Of course, friendly societies have fallen foul of regulators a few times but only for poor admin or a genuine error – never for trying to squeeze as much out of customers as possible and blow the consequences.

LV= is a cuckoo in the friendly society nest – many are tiny operations – and its rush to ape the banking and insurance giants has tarnished the image of an industry that may not mean much to people now but still has a distinguished history.