Nearly a fifth of this year’s retirees will still be paying off debt

21st January 2013

The number of people retiring in debt remains uncomfortably high at 18 per cent of the population according to research from insurer Prudential.

The average owed by those retiring is £31,200 though this is a big improvement on the previous year when the figure was £38,200. This reflects the fact that many people and not just those nearing retirement are paying down debt.

Some 56 per cent of those with debt owe money on credit cards while 43 per cent owe money on their mortgage. The debt repayments amount to an average repayment of £215 a month down from £257 last year.

Men are still much more likely to retire in debt and by a greater amount than women but they have also seen their debt levels decrease much more significantly.

Twelve months ago the average debt for men was £45,300 but this has fallen steeply to £33,800. For women the comparable figures are £29,400 falling to £28,100. Twenty per cent of retiring men are in debt compared with 16 per cent of women.

The class of 2013 research tracks the plans and expectations of people entering retirement this year.

The insurer says the source of debts has shifted, with an emphasis on unsecured borrowing. More than half (56 per cent) owe money on credit cards, while 21 per cent have outstanding bank loans and 19 per cent have overdrafts – an increase from 13 per cent since last year. However, fewer of this year’s retirees with debts owe money on their mortgages, down to 43 per cent from 50 per cent last year.

Worryingly 22 per cent of those retiring in debt in 2013 have monthly repayments of £400 or more.

On average, retirees with debts expect it will take just under four years to clear the money they owe. One third (33 per cent) of people expect to pay off their debts in two years, while 12 per cent do not expect to ever be debt-free.

Vince Smith-Hughes, Prudential’s retirement income expert, says: “The fall in average debt owed by this year’s retirees is a welcome sign that people are paying off some of the money they owe before they stop working.

“Debt does not have to be a major issue for people in retirement as long as they have sufficient income, and realistic and manageable repayment programmes in place. There is plenty of free help and advice available through the Money Advice Service and Citizens Advice Bureau for those with debt issues.

“But when people’s finances are still under pressure, with expected retirement incomes at a six-year low according to our Class of 2013 study, it’s important to ensure debt repayments do not eat into retirement incomes too much or for too long. Paying off debt as early as possible – preferably while still working – will help to ensure that retirees have more disposal income, in turn enabling them to enjoy a more comfortable retirement.”

Prudential’s research results also show significant regional differences in expected retirement debts. People in Wales planning to retire this year are the most likely to have debts, with 26 per cent still owing money, while those in Yorkshire & Humberside are the least likely, with just 13 per cent expecting to take debts into retirement.


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