Judith Howard says it does not pay to be thrifty and wishes she had not deferred taking her state pension as she is now taxed and loses out on benefits
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In our new Pension Diaries series, we will be speaking to people of all ages in the UK to find out how much or how little they have saved for retirement and the realities of putting money aside for your future.
Today, we speak to Judith Howard, 79, who lives alone in Wandsworth, south London, in the house she grew up in with her parents.
Judith worked building organs for churches and fairgrounds as well as part time in an office and only retired at the age of 75.
She says that life as a pensioner is a struggle and she has to watch every penny – and lose out despite working hard all her life due to frozen income thresholds.
Monthly pension income
State pension: £950
Private pension: £280 from an annuity
Total: £1,230
What was your occupation and how much did you make?
I studied languages and music at university and did a lot of extra courses and qualifications and studied organ building in Holland. As a result of all my studies, I didn’t start working until my late 20s.
I worked as an organ builder on mostly mechanical organs for fairgrounds and churches. Since I was in my late 40s, I worked on my own.
My mother became very ill and eventually died in 2012. While I was caring for her, I was finding it hard to get enough organ work done because it is a labour-intensive craft and is badly paid per hour. So I ended up supplementing it regularly with office work.
While working in organ building, I was turning over around £12,000 to £13,000 a year. I was having to spend around half of that in rent for my woodwork materials and rates. I was only left with about £4,000 a year, but was living at home.
After my mother died, I was finding it difficult to carry on paying for the rent on the workshop, so I re-built my grandfather’s little workshop in the garden and began working from home.
But in 2008, I was diagnosed with an underactive thyroid problem and was quite poorly. I could not do the woodwork anymore as my concentration was affected.
I began doing more office work and did not finish until I was 75.
Judith Howard, 79, says life has always been a struggle. She deeply regrets deferring her state pension until 75 due to frozen tax thresholds (Photo: Independent Age)
How many pensions do you have?
As I was mostly self employed, the only provision I made for a pension was paying £100 a month into a pension fund that was dedicated to becoming an annuity at the end. I paid into it from the late 1980s. I also put £50 a month into a savings plan which was aimed at saving for retirement.
I could only take it when it matured at the age of 65 and I had £50,000 come out of there which has gradually been spent keeping me going over the years.
Under the terms of the annuity, I received a nine per cent return, so I was getting about £4,000 a year from that pot.
Due to the fact I didn’t start my working career until my late 20s, I had a big gap in my National Insurance contributions so I would not have received the full state pension. I ended up deferring it until the age of 75 as you receive an uplift.
Because I wasn’t working very much, I was eligible for working tax credits, so that, plus my part-time earnings and my income from my annuity, saw me through until I stopped working altogether.
How much do you have to live on with your pensions?
I am getting about £950 a month from my state pension and then about £280 a month from my annuity and my total income for the year is about £14,000. But I am still renting a garage to store all my wood for the woodwork which costs £2,000, which only leaves me with £12,000 a year.
From that, I have to pay all my bills, council tax, food and living costs and it is incredibly difficult. My house is so cold and last year, due to them taking away the winter fuel payment, I couldn’t afford to put my heating on so I wore my coat indoors as it was 10 degrees inside. It is a miserable existence.
Life has always been a struggle for me – I’m used to that. But I never imagined that by the time I got to being a pensioner, I would be living like a student again, constantly doing calculations in my head about how much I can spend.
What is your biggest pension regret?
I bitterly regret deferring my state pension now as, even though I did benefit from my pension going up by 10.4 per cent a year, the personal tax thresholds didn’t go up so I shot myself in the foot.
It takes me just over the threshold for pension credit, so I can’t benefit from that help, nor can I get help with council tax.
The frozen thresholds also means that I am paying a large amount of income tax on my annuity. I was getting around £350 a month from my annuity, but now I am only getting about £280 a month as the Government is taking all the rest in tax. It feels terribly unfair.
The triple lock doesn’t apply to deferred pensions so it doesn’t go up in line with inflation – only the part that isn’t deferred sees an increase.
Judith Howard could not afford to put her heating on last year and had to wear her coat indoors
What do you wish you had known or would change when it comes to pensions?
If I could turn back time, I would have just deferred my state pension long enough to cover the gap of the missing NI contributions, but no longer.
Perhaps I shouldn’t have studied for as long and started working earlier.
The trouble is, you can’t foretell what the government is going to do and how they will make the rules unfavourable to people who have been thrifty.
It definitely does not pay to work hard and frugal because you lose out on so many benefits. There are so many lazy people who sit on their backsides all day who have made a lifestyle of being on benefits – and we are all paying for them.
What is your idea of a dream retirement?
I would love to have just enough money to live comfortably and not have the constant stress of counting every penny.
But soon, even those on the ordinary state pension will be taxed as a result of the frozen thresholds. The Government is being very stupid, as not only does this affect pensioners, it impacts the jobs market as people realise they are better off on benefits than going out to work.
Deferring your state pension
You can decide to defer taking your UK state pension – and if you do, you will receive an uplift for doing so.
The level of uplift depends on when you reached state pension age. For those who reached state pension age before 6 April 2016, the rate of uplift is one per cent for every five weeks you defer. This works out at a 10.4 per cent increase in your state pension if you defer for 52 weeks.
For those who reached state pension age on or after 6 April 2016, the deferral rate is one per cent for every nine weeks deferred – or just under 5.8 per cent for every 52 weeks.
The risk of deferring the state period for a long period is that you might not live long enough to benefit from it financially.
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