UK pensioners in debt
The UK’s retired are struggling with their finances, says Christina Jordan. Could an equity release scheme be the answer?
Over one million retirees – 10% of the UK’s retired population – have an average debt of £15,500, and 70,000 retirees have debt between £50,000 & £75,000, according to a survey from lifetime mortgage provider Prudential.
The Retirement Index survey shows that one in four retired adults – 2.7million people – say they do not have sufficient income to meet all their financial commitments.
Angus MacIver, director of Prudential UK, said: “We know that people expect their retirement income to be between £15,000 to £20,000 per year in order to maintain the standard of living they are used to. The huge gap between people’s expectation and reality is at the root of UK savings gap.”
He continues: “Pensioners paying out around £60 a week for loans or credit cards in interest charges while still trying to budget for bills and food and so on doesn’t bode well for an enjoyable retirement. Interest rates have been pretty stable for a number of years, but if these start to rise sharply over the next couple of years, debt repayments may not be sustainable for pensioners.”
Recent research from Prudential has highlighted that 1.4 million pensioners are living on less than £5,000 a year, and after paying out for necessities such as council tax, water and electricity bills, they are left with £3,092 per annum which is equivalent to £59.46 a week. Even if interest rates don’t rise, the possibility of struggling with debt repayments is very likely given the number of retirees living on such low incomes.
Many pensioners are now looking to alternative sources (in addition to their pension) to supplement their retirement income in order to live an ‘enjoyable life’. In addition to investments and savings, property is increasingly seen as another way of boosting earnings. Homeowners are looking to supplement their income either by downsizing or through an equity release scheme. Downsizing is the most popular way to release equity from property (19%), but 10% are now saying they would use a lifetime mortgage or an equity release scheme to release funds.