It was held by Pharisees in the time of Jesus.
In the Babylonian Talmud, translated by Michael L. Rodkinson (1918), one reads at Tractate Rosh Hashana Chapter 1, pp. 26-27:
We have learned in a Boraitha: The school of Shammai said: There are three divisions of mankind at the Resurrection: the wholly righteous, the utterly wicked, and the average class. The wholly righteous are at once inscribed, and life is decreed for them; the utterly wicked are at once inscribed, and destined for Gehenna, as we read [Dan. 12:2]: “And many of them that sleep in the dust shall awake, some to everlasting life, and some to shame and everlasting contempt.”
The third class, the men between the former two, descend to Gehenna, but they weep and come up again, in accordance with the passage [Zech. 13: 9]: “And I will bring the third part through the fire, and I will refine them as silver is refined, and will try them as gold is tried; and they shall call on My name, and I will answer them.”
Concerning this last class of men Hannah says [I Sam. 2: 6]: “The Lord causeth to die and maketh alive, He bringeth down to the grave and bringeth up again.” The school of Hillel says: The Merciful One inclines (the scale of justice) to the side of mercy, and of this third class of men David says [Psalms, 114:1]: “It is lovely to me that the Lord heareth my voice”; in fact, David applies to them the Psalm mentioned down to the words, “Thou hast delivered my soul from death” [ibid. 8].
Likewise, one may find in the Tosefta Sanhedrin, 13:3, a rabbinic supplement to the Talmud, the following:
In the House of Shammai it was said: There are three groups: One is destined to eternal life, and another is consigned to ignominy and eternal abhorrence- they are the thoroughly wicked, the average among them will go down to hell, and dive and come up and arise thence and be healed . . . In the House of Hillel it was said: “[God is] rich in kindness (Exodus 34;6)”- would incline the balance to the side of mercy.”
This passage from the Talmud and the corresponding supplement proves that the Pharisees believed in the concept of Purgatory. In fact, most Jews (aside from the Sadducees) living in the two centuries leading up to Christ’s birth believed in something akin to Purgatory or the concept of a divine punishment that is regenerative, not vindictive.
Why is this important? This is important because we see St. Paul, a student of Gamaliel who was a Shammaite (as per Jacob Neusner in The Rabbinic Tradition about the Pharisees before 70), using Zechariah 13:9 in the same manner in 1 Cor. 3:10-17 as the School of Shammai did above.
In addition to 1 Corinthians 15:29 that you cited to in your book, The Catholic Verses (which I highly recommend to all of your readers, by the way) there is another verse in St. Paul’s writing that alludes to purgatory:
2 Corinthians 12:1-4 I know someone in Christ who, fourteen years ago (whether in the body or out of the body I do know, God knows), was caught up to the third heaven. And I know that this person (whether in the body or out of the body I do not know, God knows) was caught up into Paradise and heard ineffable things, which no one may utter.
Here, St. Paul references two places–the third heaven and Paradise. The Pharisees during intertestamental times believed that there were several levels of heavens, seven in all, each having a distinct purpose. Third heaven and Paradise were just two of those levels. Along with this heavenly scheme, they also believed that were also seven levels of the abode of the dead. Purgatory one of those levels. Compare. Philippians 2:10. Dante didn’t just make up the notion of levels of heaven, hell and purgatory in his Divine Comedy.
[added later, on 2-17-17: To my knowledge, only the Sadducees did not believe in purgatorial state. The Pharisees did, the Essenes did, later scriptures such as Maccabees and Daniel and Wisdom demonstrate such a belief, not to mention intertestamental writings like the Testament of Abraham and the Book of Enoch. The Kaddish prayer that dates back to that time is specifically a prayer for the dead. In my mind, given the widespread belief in a purgatorial state, if Jesus did not believe in it, He would have explicitly taught against it.
C. S. Lewis Believed in Purgatory & Prayer for the Dead [6-22-10; rev. 10-8-19]
Raising of Tabitha: Proof of Purgatory (Tony Gerring) [3-20-15]
(originally posted on my blog on 9-20-11)
Photo credit: Saint Teresa of Ávila Interceding for Souls in Purgatory, by Peter Paul Rubens (1577-1640) [public domain / Picryl]