Vince Smith-Hughes

Head of Business Development

Retirement debt on the rise again

17 Feb 2017 

  • A quarter of those planning to retire this year expect to do so in debt, owing an average of £24,300

  • The proportion of those retiring in debt is at the highest level ever recorded by Prudential’s Class of… research

  • The average amount owed has increased by nearly 30 per cent since last year

  • Members of the Class of 2017 expect to take an average of three and a half years to pay off their debt

Retiring with debts outstanding is a problem that has started to grow again according to new research by Prudential1. The proportion of people retiring in debt this year is at its highest level for seven years– jumping to one in four (25 per cent) of 2017’s retirees, up from one in five in 2016.

Prudential’s annual research into the financial plans and aspirations of people planning to retire in the year ahead is now into its tenth year, and this year’s retirees, the Class of 2017, who still have debts, owe an average of £24,300. This is an increase of £5,500 or 29 per cent since last year and the first time Prudential has reported a growth in retiree debt since 2012 when the figure peaked at £38,200.

Those who are planning to retire with debts in 2017, and expect to clear them, will take nearly three and a half years on average to pay them off – and the repayments will cost them an average of £230 a month, up slightly on the £224 a month faced by last year’s retirees. However, 16 per cent expect to take seven years or more to pay off their debts and seven per cent fear they will never clear the money they owe.

Women planning to retire this year with debts owe slightly more on average than men at £25,700 compared with £23,400. However 28 per cent of men expect to retire with debts outstanding, compared with just 21 per cent of women.

Mortgages have become a bigger source of debt for the Class of 2017 compared with previous years. Nearly four in 10 (38 per cent) of those expecting to retire this year with debt still owe money on property, up slightly from 33 per cent last year. However, credit cards remain the major debt issue with 51 per cent of those with debt still owing money on plastic at retirement.

Vince Smith-Hughes, a retirement income expert at Prudential, said: “For most people the move from work into retirement will see them having to cope with a drop in their income. So having to use precious retirement income to pay off debts could make life even more tricky for the newly retired.

“With this in mind, it is a worry that we’ve seen a big jump, not only in the proportion of retirees with outstanding debt but also the amount that they owe. Many people will benefit from a consultation with a professional financial adviser to help get their finances in the best possible shape before they retire.

“People looking for free information on how to pay down as much debt as possible, preferably before the time comes to give up work, can contact Citizens Advice. The Government’s Pension Wise guidance service can also be a good starting point for people preparing to give up work and thinking about taking an income from their pension savings.”

The Prudential research also found that there are wide regional variations underlying the average national retiree debt figure, with people retiring in London (44 per cent) the most likely to owe money, while those in the West Midlands (16 per cent) are the least likely. 

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