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A fifth of retirees facing unresolved debts

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27/01/2015
Nineteen per cent of people planning to retire in 2015 will do so with unresolved debts, according to a new study released by Prudential.

Since 2011, the insurer has conducted research into retiree debt and finances. This year’s findings indicate that those retiring still in debt is increasing, up 2 per cent from 17 per cent last year.

However, retirees are now resolving their debt burden faster – the average time taken to get rid of debt has fallen from four to three years. That said, one in ten respondents said that they expect to spend nine or more years fully resolving their debts, and 5 per cent of participants believe their debts won’t be rapid in their lifetime.

The most common causes of unpaid debts are outstanding mortgages (43 per cent) and credit card payments (55 per cent). Figures indicate that women are disproportionately impacted; indebted female retirees in 2015 have an average of £24,900 to repay, while the average  male retiree owes £19,700.

Encouragingly, however, average retiree debt has almost halved in three years; those retiring with debt this year will on average owe £16,400 less than their 2012 counterparts. The table below illustrates this trend.

YMoney.Table2.27.1

While the ‘Class of 2015’ have the highest expected annual retirement income for six years at £17,000 a year, debts remain a major drain on their finances. On average, debt repayments are currently costing them more than £200 a month, rising to over £500 a month for one in seven (14 per cent).

“It is a concern that the proportion of people reaching the retirement milestone still owing money is refusing to fall,” Stan Russell, retirement expert at Prudential, said. “Retirement is a time in life when it is necessary to re-assess household budgets, and any debts outstanding will inevitably make this job more difficult.”

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