Derin Clark

Derin Clark

Online Reporter
Published: 15/01/2020

A high number of consumers are expecting to retire saddled with the burden of thousands of pounds of debt, a new study from equity release firm Key has found.

According to the study, more than one in three people are expecting to retire with an average debt of £17,460 this year. Of those in debt, 48% still owe money on credit cards, 31% have an outstanding bank loan and 14% are still paying off their mortgage. The study also found that while the average amount of debt owed is £17,460, 8% owe over £20,000 and 4% do not actually know how much they owe.

This year, the State Pension Age is due to start moving to 66 for both men and women, which should mean that retirees have had an additional year to save into their pension, however with so many expecting to retire with high levels of debt, it could negate the financial benefits of retiring a year later. Ideally, those entering their retirement should be aiming to start their work-free life in as strong a financial position as possible. There are ways to top up pension funds with additional income when retiring, such as equity release, however it is important to understand these often come with a risk and it is vital to seek independent financial advice before making such a significant decision.

Will Hale, CEO at Key, said: “With changes to the state pension due to start coming into effect this year, it is vitally important to understand the challenges and aspirations of the “retirement class of 2020”. Today’s findings suggest that while most people work hard to retire debt-free, this is not the reality for one in three people who need to consider how they can service and repay over £17,000 in borrowing from their retirement nest egg. Even those with generous incomes may find this a stretch and people are taking an average of three-and-a-half years to clear the debts they retired with – at a time when they should be enjoying an active retirement and worrying less.

“Equity release is not right for everyone, but it is vitally important that people are not prevented from considering how their largest asset, their home, can support them in retirement by misconceptions and unanswered questions concerning later life lending options. There is a lot of help available online on how to budget for retirement and working with a financial adviser in the run-up to retirement can make a massive difference in being as retirement ready as possible.”

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