One in five pensioners retiring this year will owe an average of £33,900 in debt, Prudential has found.
According to Prudential’s Class of 2018 report, looking at the financial plans and aspirations of those looking to retire this year, 2018’s retirees have debt that is nearly 40 per cent higher than their peers who retired in 2017.
In comparison to figures recorded in 2016, the average debt burden is now 80 per cent higher than the lower of £18,800 and has risen for the second year in a row. Nonetheless, the proportion of people retiring in debt this year has improved from 2017, dropping from 25 per cent to 19 per cent.
Pensioners retiring with debt expect to spend an average of three and a half years to it off; with repayments of an average of £285 a month. These are up by £55 from £230 monthly payments made by the Class of 2017. A further 14 per cent expect to take seven years or more to pay off their debts and six per cent are concerned that they will never clear the money they owe.
Considering the reasons for their debts, morgates and credit cards are the biggest issues, with around 38 per cent still paying off their mortgages and 53 per cent owing money for their credit cards. Eighteen per cent have bank loans and overdrafts to pay off.
Moreover, men expecting to retire in debt owe considerably more than women at ££43,600 compared with just £19,200 and 22 per cent of men expect to retire in the red as opposed to 16 per cent of women.
Prudential retirement income expert Vince Smith-Hughes commented: “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.
“However, debt repayments will take a substantial slice of monthly retirement income which will make budgeting tougher at a time when most people will see their income drop as they stop work. It is not always possible to be debt-free at retirement but many people will benefit from the free information available from Pension Wise, preferably before the time comes to give up work. Many will also benefit with a consultation from a financial adviser.”