Pensioners are forecast to have amassed a total of £86billion in debt by the end of the year, up by £35billion from just five years ago, research suggests.
And worrying data from the Centre for Economics and Business Research indicates that the rate at which over-65 debt is accruing is accelerating.
Last year’s research predicted that the total debt of over-65s would only reach £65billion in 2017 – but in reality, borrowing was growing significantly faster and the total is now forecast at £13billion more.
Pensioners are forecast to have amassed £35billion in extra debt in five years
The retirement lending market includes all types of secured and unsecured debt including mortgages, credit cards, overdrafts, loans, car finance, hire purchase, student loans, payday loans, and store cards.
The research, which was commissioned by equity release lender More 2 Life and is based on data from the Office for National Statistics, also found that homeowners aged 65 to 74 who are paying off a mortgage owe an average of £120,000.
This is 24 per cent higher than in 2013 and £7,000 higher than the average for 55 to 64-year-olds currently repaying a mortgage.
Those aged 75 to 84 who are paying off a mortgage owe over £78,000 on average – up by 40 per cent in just five years, from £56,000 in 2013.
Dr Louise Overton of the University of Birmingham said that among the growing number of older people carrying secured and unsecured debt into retirement, some may be doing so as part of a deliberate asset management strategy.
‘But worryingly, this report indicates that a significant minority are doing so to help manage cash flow problems and make ends meet,’ she added.
Homeowners aged 65 to 74 who are paying off a mortgage owe an average of £120,000
More 2 Life added that the generation’s use of interest-only mortgages, as well as their borrowing trends and relatively modest pension savings, are likely to have contributed to the rise in debt.
David Rodger, chief executive of the charity Debt Advice Foundation, said: ‘There are many reasons for the increase in debt among the over-65s.
‘Not only are we seeing higher numbers of people than ever before carrying unsecured debt like credit cards and overdrafts into retirement, but we’re also seeing more homeowners entering later life with mortgage debt still in tow.’
Rodger added that as income naturally falls during retirement, outgoings and income shocks can become more difficult to manage.
What should I do if I can’t keep up with my debts?
There is help out there for those who are aged over 65 and find themselves in debt, with a number of charities offering free debt advice and support.
Citizen’s Advice, Step Change, Debt Support Trust and Debt Advice Foundation are all registered debt advice and education charities offering free, confidential advice to anyone worried about loans and debt.
Rodger said: ‘If you are struggling to meet your credit repayments, contact a debt charity who will be able to help you budget and will also be able to offer advice on any debt solutions available.
‘You should also check that you are receiving everything that you are entitled to by finding out what benefits are available to people in your circumstances, such as help with fuel, which will free up more income to pay off your debts.’
A number of charities offer free and confidential debt advice and support
There is also the option of equity release, a long-term loan which is secured on your property. This option may not be the right choice for everyone, however.
Equity release – available only to those over 55 – allows you to release cash from your property and keep living there without having to make monthly repayments.
Instead, the loan is repaid when you die or are taken into care and the house is sold. However, as there are no monthly repayments, interest charges compound over the years which can eat into homeowners’ equity significantly, leaving little to pay for care in later life or to pass on to children.
FIND OUT ABOUT EQUITY RELEASE
Dean Mirfin, of equity release advisory service Key Retirement, said that almost a third of customers use equity release to repay unsecured debts such as credit cards or loans, and 21 per cent use it to clear an outstanding mortgage.
‘There is a wide variety of equity release products which can be used to clear outstanding borrowing so it depends on factors such as the value of the property, size of the debt and the age of the customer,’ he said.
‘Equity release is not the only option that you can consider when you look at repaying debt as you may wish to downsize, remortgage or consider asking family for help.
‘Others may need more hands-on debt management help and support. It very much depends on your own individual circumstances.’
Rodgers said: ‘Equity release can be an option for some people in certain circumstances, however, it is important that anyone considering doing this takes advice from an independent financial adviser first.’
In addition, those in debt could benefit from negotiating with their creditors, cutting down on outgoings, or moving their debt somewhere cheaper.