Half of over-55s face retiring in debt
Many struggling to clear debts before they give up work.
The future is far from bright for the next generation of pensioners, with new research revealing that almost half of over-55s are struggling to clear their debts before they retire.
On average over-55s owe £4,400 each, according to figures from the Debt Advisory Centre. Those debts are held on credit cards, unsecured loans, mortgages and hire purchase agreements. Around 13% of people owe more than £10,000.
Dealing with debt
These large debts could mean that thousands of older people have to continue working past their retirement age. Of those surveyed 7% admitted that they were planning to delay their retirement while they dealt with their debts.
The research has also revealed a shocking lack of financial planning among the older generation, with 25% saying they have no idea how they are going to pay off their debts.
“It’s very worrying to see such a high number of people approaching retirement with substantial debts to clear,” said Melanie Taylor, spokesperson for Debt Advisory Centre. “It’s also concerning to see the lack of planning that some are doing to ensure these debts are paid.”
Anxious and annoyed
Look at one of those statistics from the other side and the picture becomes even bleaker – only 7% are planning to continue working to pay off their debts. This means the vast majority are planning to retire while still owing money. Back in January, Prudential reported that one in five people planning to retire this year will do so in the red, with an average debt of an incredible £21,800.
The survey found that a quarter of over-55s are anxious about approaching retirement with debts and were unsure how they were going to manage. More than a quarter said they felt annoyed that their retirement would be affected by debt.
Entering into retirement with debt is very worrying, especially if you have no idea how you are going to meet your financial obligations.
“Most people see their incomes drop once they move from a regular wage to a pension, which usually means they have to change their lifestyle. Trying to make debt repayments with a reduced income means that some pensioners will have to sacrifice more than is comfortable in order to cover priority bills such as housing costs, utilities and food,” said Taylor.
If you are approaching retirement with debt and aren’t sure what to do about it, there are plenty of places you can get some free help. Read Where to get free debt advice.
Also be sure to check out our guide What to do if you are retired and still in debt.
Is your pension on track? Keep up to date with Plans
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Working in both a Collections (NOT Recoveries) department which is a 'half-way house' department that allows us to try and turn a customers position around and return them to their branch in a better financial state (so long as they change the manner in which they budget, going forward), I see this situation with alarming regularity. Many customers have a blinkered approach and still hark to the days where they can transfer all of their unsecured debt to their mortgage and simply carry on where they left off, without taking good advice and changing their budgeting habits. Regrettably, I have also witnessed first-hand where customers have no equity left and are in a desperate situation which required them to sell their home. I felt awful for them, but conversely, if they had taken heed of their previous Manager's advice to manage their budget better, they might not have been in that position. I now sanction facilities for branch based customers who are managing their money without Bank support, but they too have now commenced the roller-coaster ride of spend, spend spend.... Hindsight is a wonderful thing, but when will mankind learn from their mistakes????
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my mistake - you are not old enough for 65+ bonds
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It must be difficult when planning for the future. I don't remember interest rates being so low for so long. In the same way that people in work, taking out a mortgage, then losing their job must be devastating for them. However the problem is assuming that the future will be the same as the past and that the present economic climate will be the same. Without a guarantee, like say an indexed linked or escalting pension you a left yourself open to the vagaries of covernment policy, like quantitive easing, which has seriously depressed interest rates. I would like to sound positive and say interest rates will soon pick up but with inflation being so low I think it will be many years before you see 5% + on savings accounts. 60 is not old at all, I am 71, and if you are reasonably fit you could still get a job to help out your finances. Some companies like B&Q activley have a policy of employing pensioners. Old people make good employees - they are often reliable and polite and relate very well to customers. Regarding your savings I am assuming you have done all the obvious things like keeping £20,000 in a Santander account, £5000 ib a Club LLoyds account, put your £10,000 into 65+ bonds? If you want more excitement then buy several high yielding income unit trusts. If you buy several with different dividend payment dates ypu could get a regular monthly income stream. Be aware of course that while the income is fairly safe and should increase with time that the capital value could fall.
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07 June 2015