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Pensioner debt on the rise, Prudential research reveals

5 February 2018

The amount of debt pensioners are burdened with is on the rise, with nearly one in five expecting to stop work this year owing £33,900, according to new research by Prudential. 

Prudential’s annual research, the Class of 2018, found that this year’s retirees have debts nearly 40% higher than those who expected to retire last year. The average amount of debt has increased for the second year in a row and is now 80% higher than the low of £18,800 recorded in 2016.

On a more positive note, the number of people retiring in debt has fallen to 19% from 25% in 2017.

Vince Smith-Hughes, a retirement income expert at Prudential, said: “At a time when the base rate is expected to rise, it is worrying to see the rapid increase of a pensioner’s average debt. Interestingly, there is a smaller number of people retiring in debt, but for those pensioners retiring in debt, the amount owed is on the rise.

“Given forthcoming retirees’ expected income has increased for the fifth year in a row, it’s possible that some people feel more comfortable about servicing debt, and are borrowing more. Meanwhile more and more grandparents are helping their grandkids with university fees and children with house deposits.”

Smith-Hughes warns that debt repayments will take a “substantial slice” of monthly retirement income, which in turn makes budgeting harder. Prudential found that those planning to retire with debts in 2018 expect to make repayments for an average of three and a half years to get out of the red. Furthermore, the payments will cost them an average of £285 per month, up nearly a quarter on the £230 a month faced by the class of 2017.

Men expecting to retire in debt owe substantially more than women at £43,600 compared with just £19,200 and 22% of men expect to retire in the red, as opposed to 16% of women.

Prudential’s research found mortgages and credit cards to the biggest source of debt for those looking to retire this year. Around two out of five (38%) of those in debt are still paying off mortgages, while 53% owe money on their credit card.

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