Debts & Loans

Pensioners are falling deeper and deeper into debt as they struggle to cope during the recession. One in five has outstanding credit card debts with the average balance an alarming £8,892 per person.

Many rely on cards to pay for everyday essentials as pension-pot values have plummeted during the downturn and income from savings has been hammered by falling interest rates. At a time when debts should be a thing of the past, many simply can’t cope and are drowning in it. Research from Key Retirement Solutions shows the average credit card balances for those aged 65-69 is £9,086, while the average for those aged over 70 is still a scary £8,760.

As more people rely solely on the state pension, average monthly repayments of £243 are way beyond their means. “Debt is a worry for people of all ages in the recession but it is particularly troubling for us to see a marked increase in the problems older people face,” says Chris Tapp, director of the charity Credit Action.

“Last year, levels of debt among over-60s rose more than for any other age group. “As the crunch has hit, the value of pensions, property and investment and savings income has plummeted. “Tens of thousands who should be enjoying their retirement are instead stressing about their finances – and this ‘grey debt’ is an area of particularly grave concern.” But it’s not just credit card debt. One in three pensioners go into retirement still owing money on a mortgage, with an average of £43,000 and monthly repayments of £205.

Citizens Advice has seen a big increase in the number of older people seeking debt advice, with 5% of the 7,000 new debt cases it handles every day being from over-65s, 10% from 55 to 64 year-olds, while the proportion of under-45s has gone down. “People need to think ahead and not take out unnecessary credit in the lead up to retirement,” says Moira Haynes, of Citizens Advice.

“Inevitably, income will drop for most people during retirement and they need to take that into account and do some proper financial planning. “Anyone struggling with debt should not ignore it. It won’t go away. If they really can’t cope, they should see a debt adviser who can help them come up with an affordable repayment plan.”

We cashed in on our home

Linda Taylor was heading into retirement next month with £8,000 of credit card debts and still owing £6,000 on her mortgage. “We didn’t know what to do,” says Linda, 59, whose husband Robert is 62. “We’ve been struggling for a while and have been buying everyday essentials on our credit cards,” adds Linda.

Grandparents Linda and Robert , who live in Tamworth, Staffs, accessed cash from their home in an equity release plan. Their three-bed house is worth £120,000 and they got a £30,000 lifetime mortgage through Key Retirement Solutions.

Linda explains: “We can now relax and can live here for the rest of our lives.” The couple don’t have to make any repayments but interest charges – at a rate of 6.7% – are added to the loan and must be repaid when they die and the house is sold.

DEBT BUSTERS

Note your income and outgoings, and see if you can make savings anywhere. Switch to better deals. Talk to creditors: They can’t help if they don’t know you’re struggling. Pay debts with savings – debt interest is higher than savings returns.

Get free advice from a charitable debt advice agency like National Debtline, the Consumer Credit Counselling Service or Citizens Advice. Think about downsizing. It can free up cash to pay debts and make life more affordable by cutting bills. Claim all age-related benefits such as free bus passes. Equity-release plans release cash tied up in your home but it means you can’t leave the full value of your home to loved ones.