One in four, 25 per cent, of new pensioners are to retire in debt this year, in comparison to 20 per cent in 2016, Prudential has found.

Prudential’s tenth edition of its annual research, looking at the financial plans and aspirations of people planning to retire in the year ahead, found that those retiring with debt in 2017 are likely to owe an average of £24,300. This is an increase of £5,500 or 29 per cent since last year and also the first time Prudential has reported a growth of retiree debt since 2012, when the average figure reached £38,200.

It was noted that those retiring with debt who expect to clear them will take nearly three and a half years, on average, to pay them off, with repayments of an average £230 a month, up slightly from £224 last year.

Sixteen per cent of people in this position, however, will expect to take seven years or more to pay off their debt and seven per cent voiced concerns that they will never clear the money they owe.

The research also found considerable differences across regions in the UK. Those retiring in London, 44 per cent, are most likely to owe money, while those in the West Midlands, 16 per cent are the least likely.

Slight differences were also found between men and women retiring this year, with women owing more on average than men at £25,700 in comparison to £23,400.

Mortgages are now a bigger source of debt than in previous years, Prudential found, yet credit cards remain the major source with 51 per cent still owing money for these at retirement.

Prudential retirement income expert Vince Smith-Hughes 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 trickier 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.”

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