When Sue Watts wants to put some extra heating on or treat herself to a theatre show, she now knows she can do so without feeling guilty or having to count her pennies.
The 75-year-old, who lives in Leeds, decided to defer taking her state pension for five years and carry on working for longer to get a bigger state pension, which has led to her being able to enjoy life as a pensioner instead of being “old and poor.”
Due to the way deferrals of the state pension work, she says her payment comes to more than £17,000 per year, whereas the full new state pension is £11,973 and the basic state pension is £9,175 per year.
“I deferred my state pension for the full five years and it has made a massive difference to my income and I would now call myself comfortable,” she said.
“The main risk of deferring taking your state pension is the chance that you may not get long to enjoy it. So far, I’ve been lucky and I’m very glad of the decision. It is the best thing I ever did.”
Watts, who is divorced and has no children, says that as she has no family or anyone else to rely on, it was important to her to have a decent income in retirement.
She started work at the age of 18 and spent the bulk of her career working in the NHS as a nurse and midwife, before moving over into social work.
“None of my roles were highly paid and a lot of my career was in the voluntary sector which although had a pension plan, it wasn’t as good as the NHS,” she explained.
“I could have taken my state pension at the age of 61 as that is what the state pension age was at the time [for women]. But I was worried as I am on my own and I was concerned I wouldn’t have enough to live on to have a comfortable life and continue with activities and things I wanted to do.
“I ended up deferring my state pension for the full five years and I carried on working full-time until the age of 66.”
People can decide to defer taking their UK state pension – and if they do, they 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 1 per cent for every five weeks they 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 1 per cent for every nine weeks deferred – or just under 5.8 per cent for every 52 weeks.
The risk of deferring for a long period is that you might not live long enough to benefit from it financially.
Watts says she is in a more fortunate position than people who would be retiring today as not only did she benefit from a higher uplift for deferring her state pension, the state pension age was lower. She appreciates that people choosing to defer their state pension today would have to work until an older age than she did.
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For her, she says deferring has proved lucrative, as her state pension annual income is over £17,000 a year.
That money makes a huge difference, she says, particularly when it comes to the mindset of not having to worry or constantly scrimp and save.
“The main thing is that it just allows you to relax and not worry about money all the time,” she said. “I’m not a big spender and not one for cruises or things like that and I don’t go away a lot.
“But I have activities I pay for and it just means I can buy things like books and clothes and go to see a show without worrying about it.
“I do a lot of musical activities and play the violin. I am also a church bell-ringer as this is something I recently started learning. I am also a walker.”
Unlike a lot of pensioners who worry about keeping their house warm and affording the heating bills, Watts says she knows she can put on extra heating if she needs it.
“My heating bill isn’t massive because I haven’t got a big house. But I don’t have to worry about energy bills and that is worth a lot to your peace of mind.
“I’m a frugal person by nature, but if I am cold, I can afford to heat the house a bit more. I can also afford to eat sensibly and things like this make a big difference to people’s physical and mental health. Living in cold houses and not eating properly affects people’s health.”
As state pension usually stops when someone dies, Watts knows there is a risk in deferring it that some individuals might not get to benefit from it for long enough.
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“It is a calculated risk, because at this age, you don’t know if you are going to get enough time to enjoy your retirement. However, I knew I didn’t want to be poor and struggling when I retired, so I took that risk.
“I am lucky as I have had five good years and I am still feeling fit and healthy so fingers crossed, there will be plenty more.
“I can only go by my experience, but for me, deferring my state pension has been a highly positive thing and has paid off.”
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