Retirement: 20% of people retire owing money


PrudentialShocking new figures have revealed that around 20% of people are retiring, despite the fact they are still in debt.

The figures from the Prudential show that 1 in 5 retirees still have personal loans, credit cards or mortgages outstanding when they finish work, with the average debt totalling £31,200.

As shocking as these figures might be, they are actually a slight improvement on last year, when the average amount of debt, for people retiring whilst still owing money, was £38,200.

Retiring with debt

Experts believe there are a number of reasons why people retire whilst they still have debt outstanding.

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Firstly, one of the main reasons is the rise in the number of interest only mortgages taken out in the 1990’s and during the last housing boom. The Prudential research found that 43% of those people retiring with debt still owed money on their mortgage, although the good news is that this is down from 50% a year ago.

The interest-only mortgage ‘time bomb’ is a huge problem for many people, especially those with no way to repay the debt and insufficient equity to downsize. The FSA (Financial Services Authority) has taken steps to ensure that far fewer interest-only mortgages are granted in the future, but no long term solution has as yet been found for those people coming up to retirement with such a loan still outstanding.

Secondly, some people may have brought their retirement date forward, due to unforeseen unemployment. Alternatively, in the week that it was announced Annuity rates fell by more than 11% in 2012, some people may have decided to retire sooner rather than later, in a bid to get the best possible Annuity rates before they drop further.

Finally, with interest rates so low, some people may have calculated that they can afford to continue with their repayments in retirement and have therefore decided to finish work before fully repaying their debts.

Unsecured debt

Whilst the number of people retiring with a mortgage still outstanding may have fallen, more people are retiring with unsecured credit still left to repay. The number of people retiring in debt, with overdrafts still outstanding, rose from 13% to 19%, for credit cards the percentage rose from 51% to 56%.

Vince Smith-Hughes, Prudential’s retirement income expert, said: “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.”

Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email