Just under a third (32 per cent) of people who retire in 2021 will be in debt when they do so, with the average amount owed standing at £20,650, according to research from Key.

The firm said that people expecting to retire this year were facing debts around a fifth higher than the average amount of £17,460 owed by those who had finished work in debt in 2020, although it noted that the proportion of those retiring in debt had remained steady.

Men were found to be expecting to retire with around 15 per cent more debt than women, with an average debt of £21,885 compared to £19,068.

Almost half (48 per cent) of those planning to retire in 2021 in the North East would do so in debt, though they owed an average of just £8,958.

The largest average debts were in the East Midlands, where the amount stood at £35,764 but just 30 per cent expected to retire in debt.

The South West saw the fewest people retiring in debt, with just 22 per cent set to retire while in the red.

Credit card debt was the most common form of debt, affecting 40 per cent of the retirees, while mortgage borrowing affected 31 per cent.

However, the prevalence of these had decreased since 2020, with the number of retirees using their overdrafts and borrowing from family and friends having risen by 7 and 2 percentage points respectively.

Key CEO, Will Hale, said: “While it is good to see that we have not seen a sharp rise in the number of potential retirees finishing work with debt, it is concerning to see that the amount owed has increased by more than £3,000 in just twelve-months.

“This seems to suggest that those who are already in debt are finding it harder than ever to repay their borrowing and expect to be three-years into retirement before they can finally wipe the slate clean.

“Unfortunately, trying to repay debt from a fixed income while still maintaining a good standard of living can be extremely difficult and people are likely to struggle to achieve this ambition. Before their borrowing spirals out of control, they need to speak to a specialist later life adviser how will be able to help them make sustainable choices around how they manage what they owe.”

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