The amount of debt that people will carry into their retirement this year has fallen compared to last year’s figure, dropping to an average of £31,200. This average is also only for those with debt, which is just one in five of those who will retire this year.
Most of this debt comes from either credit cards, overdrafts or loans that have not been paid off, but there is also a significant portion of it from mortgages that the retirees have failed to pay off entirely. This fall has been welcomed by pension commentators, with the Prudential’s retirement income advisor, Vince Smith-Hughes, saying: “The fall in average debt owed by this year’s retirees is a welcome sign that people are paying off some of the money they owe before they stop working.”
However, though the level of debt is dropping, so are the levels of return that people are expecting to get from their pensions, meaning that those who retire this year will have less to actually pay off their debt with. Smith-Hughes again: “When people’s finances are still under pressure, with expected retirement incomes at a six-year low…it’s important to ensure debt repayments do not eat into retirement incomes too much or for too long. Paying off debt as early as possible – preferably while still working – will help to ensure that retirees have more disposable income, in turn enabling them to enjoy a more comfortable retirement.”
As much as not being in debt is good advice, it’s not of any use for those who will be retiring this year and are facing having to pay off their debts with their savings or the income they expect from their pension. Thankfully, Mr Smith-Hughes has some advice on that as well: “Debt does not have to be a major issue for people in retirement as long as they have sufficient income, and realistic and manageable repayment programmes in place.There is plenty of free help and advice available through the Money Advice Service and Citizens Advice Bureau for those with debt issues.”
It’s clear from the dropping rates of debt that people are aware of this issue, but it can cause problems among retirees. If you are worried about your debt at any stage of life, then the best thing to do is seek expert advice.