One in twelve over-55s owe money to payday lenders
According to retirement income specialists, Primetime Retirement, 8% of those aged over-55 owe money to payday lenders, with an average debt of £163.
They are increasingly turning to payday loans, which can charge APRs as high as 4,214%, to ‘tie them over as the on-going squeeze on retirement incomes from low annuity rates, stagnant interest rates and high inflation hits pensioner income.’
Over-55s are having to turn to these short-term loans despite trying to cut down on any unnecessary spending – but the research shows more than a third are currently rationing aspects of their lifestyle, with most cutting back on going out, holidays and shopping trips.
Stuart Wilson, Primetime Retirement marketing director said: “Payday loans are being increasingly used by people across the UK and the 55-plus age group are not immune. It is worrying that people who are close to giving up work still have to rely on debt to fund their lifestyles particularly when they will soon not have a payday.”
Average income for those aged 55 to 64 is £318 a week after housing costs and tax – the equivalent of £16,532 a year. But that drops 24% for those aged 65-plus compared to those aged 55 to 64.
Wilson added: “Very few people who are working would be able to comfortably absorb a 24% income cut, even if big bills such as mortgage repayments have gone, but that is the unfortunate reality for many in retirement. Rationing is inevitable given the current economic volatility but keeping your options open and retaining some flexibility in retirement is the best way to retain some control.”
The research highlights the income precipice facing many people in retirement – and the need for increased flexibility and innovation in retirement income solutions to help avoid debt problems.
This comes as consumer watchdog, the Office of Fair trading is to get new powers to allow it to clamp down on rogue lenders.
The new powers will allow the OFT to clamp down on rogue companies that provide goods and services on credit, money lending – including payday lenders, debt collectors and those offering to help people with ‘debt problems’.
Consumer Affairs Minister, Norman Lamb, said: “This will put a stop to those companies who exploit vulnerable consumers whilst dragging matters through a slow legal process. It will also give a boost to legitimate businesses, with the swift suspension of unscrupulous traders.
“The new measure is part of a concerted approach to strengthen protection around consumer credit, including issues such as payday lending and debt management. We want to encourage, and give the tools to, consumers to take sensible decisions.”
With the new powers the OFT will be able to suspend a consumer credit licence with immediate effect where there is an urgent need to protect the interest of consumers.