The Latin root meant "to weigh out," as if retirement were measured on a scale.
The English word pension appeared in the fourteenth century from the Old French pension, meaning a payment or rent. The Old French came from the Latin pensio, meaning "a measured weight" or "installment," derived from the verb pendere, which meant "to weigh" and, by extension, "to pay."1 The same root produced "expenditure," "compensation," "ponder," and "pound."
For its first two centuries in English, pension meant a regular payment for services rendered, especially a grant from a monarch to a favored subject. The meaning of a payment to a retired person appeared by the 1520s, originally in the context of government pay to soldiers and sailors who had completed their service.2
The modern pension system began with Otto von Bismarck's Old Age and Disability Insurance Act of 1889 in Germany, which created the world's first state-funded retirement payment. The concept spread across industrialized nations over the following century.3
In French, the word pension also came to mean a boarding house, from the idea of paying for room and board. English borrowed this sense in the 1640s, and it persists in European travel, where a pension in France or Italy is a small hotel.4 The same word carries two unrelated meanings, one about retiring from work and one about paying for a place to sleep, both descending from the Latin notion of weighing out what is owed.