Pensioners head for lifetime of debt

The amount of debt owed by Britain's pensioners has risen by more than a quarter in the past year, research has found.


Pensioners are now burdened by an increasing amount of loan and credit card debts, a new study has indicated Mortgages, loans and credit card debts owed by those in retirement now total £72.3 billion – a rise of 28 per cent on last year.

Scottish Widows, the pension provider which carried out the study, said the findings showed that retirees are heading for a "lifetime of debt" instead of one of financial comfort.

The increase in total debt was mostly explained by a surge in the number of retirees with a outstanding mortgage, rising from 1.1 million last year to 1.4 million in 2008. One in six retired homeowners now has a mortgage, while one in 13 has dependent children.

Among those with debts, the average amount owed has increased. For those with mortgages, the average outstanding debt rose by 10 per cent year-on-year to £42,000, while short-term debts such as credit card balances rose 13.5 per cent to £6,732.

The increase in pensioner debt comes despite a slight drop in credit card debt among working-age Britons, underlining fears that dependency on financial support no longer declines with age. It also follows David Cameron's pledge to reward savers, calling them the "forgotten victims" of the economic slowdown.

Vince Cable, the Liberal Democrat Treasury spokesman, said: "These figures make for depressing reading. Many pensioners on fixed incomes are clearly struggling to pay back their debts and deal with sky high energy bills.

"Following the credit boom of the last few years, there is a danger that many people now face a lifetime of debt. We may be facing a situation where large numbers of pensioners with high debt service costs and low incomes find themselves falling deeper into poverty, with no way out."

Gordon Lishman, director general of Age Concern, said: "Increased living costs have hit many older people hard and could have contributed to higher debt levels among pensioners. Our recent research has shown higher bills have pushed one in ten of the poorest pensioners into debt. There are also high levels of unsecured debt – such as credit cards – among some approaching retirement."

He added: "Millions of pensioners are missing out on their share of up to £5 billion of Government money which is unclaimed each year, which could make a huge difference to their weekly income."

Vicky Redwood, an economist with Capital Economics, said: "Falling interest rates have not helped savers but they haven't done much to help older borrowers either – reduced lending has made it harder to get equity release loans to cover the costs of retirement."

The Scottish Widows research is based on new figures from a sample of more than 6,000 adults whose finances were analysed for the firm's annual pensions report.

Ian Naismith, head of pensions market development at the firm, said: "It is very worrying that year on year rather than reducing, the levels of debt are growing for retirees. Retirement is a time when people should be enjoying life rather than struggling to pay off debt."

He added: "The situation doesn't look any better for pre-retirees – at a time when they should be putting all their money away for retirement they are having to concentrate on paying off debt."

The Consumer Credit Counselling Service said pensioners who contact its helpline owe an average of nearly £30,000 on unsecured loans; similar to the amount owed by those in the 40 to 59 age group.

By comparison, those seeking help in the 18 to 24 age group owe £10,000 on average, while those in the 25 to 39 age group owe £22,000.

Earlier this year another study found that about 30 per cent of homeowners over the age of 70 are still paying off their mortgage, with the average outstanding sum in the region of £45,000.

Meanwhile, record numbers of pensioners are working beyond retirement age, according to the Office for National Statistics. Nearly 1.3 million women over 60 and men over 65 are still working.


* Help the Aged estimate that 2.5 million pensioners live in poverty

Nine million of Britain's 11 million pensioners rely on savings for some part of their regular income, according to the National Pensioners Convention campaign group

One in eight retired homeowners has a mortgage debt of between £50,000 and £100,000, according to Scottish Widows

£4.6bn in benefits are unclaimed by older people every year, according to Age Concern

The average savings rate has dropped by 1.5 percentage points in the last three months alone and by 2 percentage points in the past year, according to Moneyfacts

A pensioner who pays income tax at the basic rate with £10,000 in savings will have seen their annual income nearly halve from £381.60 in December last year to £197.64 this month, according to Moneyfacts