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30% of retirees are still in debt

30% of retirees are still in debt

Category: Retirement

Updated: 26/08/2015
First Published: 26/08/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It's a shocking statistic, but it's true – research from YouGov and Old Mutual Wealth has revealed that almost a third of retirees were still laden with debt when they left full-time employment, a statistic that becomes particularly worrying when you consider the lack of regular income to pay it off.

The amount of debt is particularly concerning, with the average retiree owing £34,000 when they gave up work. However, 19% owed over £50,000, and almost one in 10 had debts of £100,000 or more. Perhaps unsurprisingly, mortgage debt was the most common culprit with 21% of respondents still owing money on their house when they retired. Despite this, a further 14% still owed money on store or credit cards, while 6% had unsecured loans.

Given the amount of debt that many retirees find themselves in, it's perhaps no wonder that so many are taking advantage of the pension reforms to pay down their borrowing commitments. The research went on to reveal that pensioners have withdrawn an average of £28,000 from their pots since the reforms came into being, with 19% using some of that money to pay off debt.

However, it may not be enough, particularly when you consider the average debt levels of retirees. Paying off debt when you're not in work can be a tricky business, which is arguably why 58% of those who had debt at the point of retirement are still in debt now (30% still have a mortgage and 28% still owe money on credit or store cards).

Start preparing

This is why it's so important to be vigilant when it comes to your debt, particularly given the fact that only around 17% expect to owe money when they decide to retire – the probability of carrying debt into retirement may actually be far higher, so if you want to be confident that you'll be debt-free when your retirement date hits, it's vital to get on top of things in advance.

Start by taking a look at your unsecured borrowing. If you've amassed a hefty credit card balance, for example, consider switching to a 0% balance transfer credit card. Doing so could give you time to clear the debt without interest being added to your bill, and you may even find that you're able to clear it sooner.

Alternatively, if you don't think you'll be able to clear the balance by the end of the interest-free period – or if you've got too much debt to consider it – why not think about consolidating with a personal loan? This can give you a clear route out of debt, because by the end of the term, you'll be debt-free! Either way, just make sure you don't spend more on your credit cards, otherwise you'll be back to square one.

You may then want to take a look at your mortgage. You may have several years (or even decades) left on your term, but if you can, why not consider overpaying? Most mortgage deals will allow you to overpay by at least a certain amount each year – typically 10% of the outstanding balance, but variable rate deals may not have any such restrictions – and this could be a great way to reduce your balance (and even your term) to get you on the path to outright homeownership before you retire. Hopefully, with a bit of careful planning, you won't be left with too much debt when that all-important date arrives.

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