This year’s retirees saddled with £34,000 of debt
Thr annual Prudential ‘Class of 2018’ research, which tracks the plans and aspirations of those retiring this year, found that debt levels are nearly 40% higher than last year’s retirees.
The debt burden has increased for the second year in a row and now stands 80% higher than the 18,800 recorded in 2016.
However, Prudential found that the proportion of people retiring in debt has fallen from 25% in 2017 to 19% this year.
Those retiring with debt this year said they expect to face repayments for three and a half years on average, costing them £285 a month to clear. This is up on the £230 a month costs faced by those retiring last year.
14% said they expect to repay their debts within seven years while 6% fear they will never clear the money owed.
Men owe substantially more than woman at £43,600 compared with £19,200 and 22% of men expect to retire in the red compared with 16% of women.
Mortgages and credit cards are the biggest debt issues for people expecting to retire this year. Nearly 40% of those in debt are still paying off mortgages while 53% of those with debt owe money on plastic at retirement. Around 18% have bank loans and the same proportion have overdrafts.
Vince Smith-Hughes, retirement income expert at Prudential, said at a time when the Base Rate is expected to rise, it is worrying to see the rapid increase of a pensioner’s average debt.
“Given forthcoming retirees’ expected income has increased for the fifth year in a row, it’s possible that some people feel more comfortable about servicing debt, and are borrowing more. Meanwhile more and more grandparents are helping their grandkids with university fees and children with house deposits.
“However, debt repayments will take a substantial slice of monthly retirement income which will make budgeting tougher at a time when most people will see their income drop as they stop work. It is not always possible to be debt-free at retirement but many people will benefit from the free information available from Pension Wise, preferably before the time comes to give up work. Many will also benefit with a consultation from a financial adviser.”