Published On: Tue, Jul 21st, 2020

Pension warning: Debt for retirees is set to reach £300billion – what should you do? | Personal Finance | Finance


Debt has become difficult to handle in recent months as coronavirus dramatically impacted the economy. To counteract this, Rishi Sunak and the wider government provided support for mortgage, credit card and loan repayments.

Interestingly though, new research from more2life revealed that dependence on debt may drop over the coming two years for the over-55s.

Using data from the Wealth and Asset survey, the Bank of England NMG survey and their own research, more2life found that the over-55s are expected to have £207billion in debt by 2021.

This scary figure sounds like a lot but it is actually £19billion less than what it was in 2019.

This dip, according to more2life and the economics consultancy Cebr, is likely due to the older generation being more cautious amid current economic uncertainty and cutting spending on big ticket items such as cars, delaying moving home and avoiding unnecessary spending.

READ MORE: Pension ‘dashboard’ to be launched under new government scheme 

“Households aged 55-64 are expected to owe £94,173, including mortgage repayments, in 2021 compared to £106,552 in 2019 on average.

“Households aged 75 and over who still hold mortgage debt will also see their total debt level fall from £67,007 in 2019 to £58,975 by 2021. “

They went on to examine how pension pots themselves have, unfortunately, taken a hit: “Recent data has revealed that nine in 10 (89 percent) people who are saving for retirement or currently retired saw the value of their pension pot fall by an average of 15.2 percent in the first quarter of 2020 – the worst quarterly performance on record.

“Furthermore, 30 percent of those aged 60-64 who are still working are now earning less than they did prior to the outbreak.”

Dave Harris, the CEO of more2life, commented on the organisation’s findings: “The coronavirus pandemic is having a huge impact on the way over-55s spend their money. The nationwide lockdown, coupled with the heightened economic uncertainty, has caused many retirees to become more cautious and rein in their spending on larger or discretionary goods. However, although we are expecting to see a short-term fall in borrowing by the over-55s, it is clear that this will not be a lasting trend.

“Almost a third of this demographic will experience a hit on their finances and are expecting their debt to rise as a direct result of the pandemic. For those who are impacted financially and need to draw on extra funds, it is crucial that they are made aware of the solutions that can help them bridge this income gap.

“As debt among older generations rises, it will be vital that they understand how housing equity can help navigate and manage their various financial obligations in retirement. The variety of products now on offer in the later life lending market means that consumers with varying needs are able to find the right option that is suited to their circumstances and ensure that they are able to enjoy a more comfortable retirement.”

Diane Watson, the founder of She Can Prosper, added to this: “The coronavirus pandemic has had a huge impact on our society, but the true economic consequences of the crisis are only now beginning to be felt.

“Whilst today’s research shows a short-term fall in debt among the over-55s, many people in this demographic will see the value of their pension savings fall which will have a massive effect on their financial wellbeing.

“Indeed, with debt levels among retirees forecasted to reach £300bn within 10 years, it’s clear that these individuals will increasingly need to turn to the borrowing options available to help boost their retirement income.

“Today’s retirees face greater financial pressures and longer life spans than the generations that came before them, making it vital for them to plan for later life adequately so that they can enjoy the retirement they deserve.”



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