This year’s retirees see huge jump in debt levels
According to Prudential’s ‘Class of 2017’ report, some one in four of this year’s retirees will enter retirement in debt, up from one in five last year.
Of those 25% who still have debts, the average amount owed is £24,300, an increase of £5,500, or 29%, since 2016. This is the first time Prudential has reported a growth in retiree debt since 2012, when the figure peaked at £38,200.
While mortgages have become a bigger source of debt, credit cards remain the major problem.The research shows that 51% of those with debt still owe money on plastic at retirement. Meanwhile 38% of those expecting to retire this year still owe money on property.
In terms of paying off these debts, Prudential shows it will take nearly three and a half years on average to clear them at an average of £230 a month. This is up slightly on the £224 a month faced by last year’s retirees. However 16% expect to take seven years or more to pay off their debts and 7% fear they will never clear the money they owe.
Vince Smith-Hughes, a retirement income expert at Prudential, said: “For most people the move from work into retirement will see them having to cope with a drop in their income. So having to use precious retirement income to pay off debts could make life even more tricky for the newly retired.
“With this in mind, it is a worry that we’ve seen a big jump, not only in the proportion of retirees with outstanding debt but also the amount that they owe. Many people will benefit from a consultation with a professional financial adviser to help get their finances in the best possible shape before they retire.”