This Year's Retirees Owe £260 MillionLess Than Last Year's

04 February 2016

· Prudential’s Class of 2016 retirement research shows the average retiree debt has dropped for the fourth year in a row to £18,800
· But 20 per cent still expect to retire this year in the red
· Retirees in debt expect to take three-and-a-half years to pay off the money they owe

The amount of money owed by those planning to retire over the course of the next 12 months has fallen for the fourth year in row, according to the latest research by Prudential2.

This year’s retirees who still have debts owe an average of £18,800, a fall of £3,000 or 14 per cent from last year and a drop of nearly £20,000 since 2012 when the average amount owed was £38,200.

However, despite the continued fall in average debts, Prudential’s unique research into the financial plans and aspirations of people planning to retire in the year ahead – the Class of 2016 – shows that the proportion of retirees in debt remains stubbornly high. One in five (20 per cent) people planning to retire this year will have outstanding debts – a figure that has remained consistent since 2011.

The Prudential study, now in its ninth year, shows that those who are retiring in debt this year expect to take around three-and-a-half years to pay off the money they owe – and debt repayments cost them on average £224 a month. However, 13 per cent expect to take seven years or more to pay off their debts and one in 12 (8 per cent) believe they will never be debt-free.

Women planning to retire this year have seen a big fall in their debts compared with last year – those with debts owe an average of £17,800 which is more than £7,000 lower than in 2015. Male retiree debt is virtually unchanged from last year, averaging £19,600.

The biggest source of debt among the Class of 2016 is money owed on credit cards – 51 percent of those expecting to retire this year with debts owe money on credit cards, while 33 percent still owe money on their mortgage. The proportion of people owing money on their mortgage has dropped steeply though, from 43 per cent last year.

Stan Russell, a retirement expert at Prudential, said: “A drop of £20,000 since 2012 in the average debts of new retirees is really good news. For many people, the switch from working life to retirement will see them getting used to living on a tighter budget and having to repay outstanding debts can only make this transition more difficult.

“However, despite the encouraging fall in the average debt, the overall proportion of retirees with debts, and the length of time these debts will last into retirement, remain stubbornly high. A consultation with a professional financial adviser in the run up to
retirement can help people to their get finances in the best possible shape for when the time comes to give up work.

“There is also plenty of free help, advice and guidance available on managing and paying off debts. The Government’s Pension Wise service can be a good starting point for people looking for guidance when planning their retirement finances, and Citizens Advice can provide help to ensure debts don’t become a long-term problem.”

The average national retiree debt figure (20 per cent) masks wide regional variations, with people retiring in London or the South West (25 per cent) the most likely to owe money, while those in the North East (seven per cent) are the least likely.

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