According to a recent report, a quarter of people planning to retire in 2017 will have unpaid debts, typically totalling around £24,000.
Reaching its highest recorded level in seven years, the insurance company Prudential found that the proportion of retirees expected to be in debt had grown to 44% in London.
Initially doing research into the issue, the Financial Conduct Authority conducted a study which forecasted 2017-18 to be a peak period, where interest-only mortgages would mature in large volumes.
Following a warning from the FCA, fears around the need to pay mortgage payments beyond retirement have grown. Nearly 50% of those with interest-only home loans may be unable to afford to pay them off once they start to mature.
Commenting on its recent research, the Prudential stated that being burdened with debt into retirement had become a growing problem once more. They highlighted that the figure had grown by 20% from 2016.
On average, £24,300 in debt is owed by those planning to retire during 2017. This is according to the Prudential’s yearly report into the financial aims of retirees, which also showed that the figure had grown by £5,500 since 2016. This was the first rise in retiree debt for 5 years; in 2012 there was a peak of £32,200.
For those retiring in the year ahead, mortgages are likely to be the biggest source of debt, with 38% owing money on a property. 51% of people planning to retire also owe money on credit cards.
Bank of England governor, Mark Carney stated that a rise in debt levels had been observed by the bank; largely stemming from unsecured debt, the figure was rising at its quickest rate in 11 years.
To pay off the owed amount, an average of three-and-a-half years would be required according to the Prudential. This would be at around £230 per month.
Commenting on the financial problems that retirees may face was Vince-Smith Hughes. Working as a retirement expert at the insurance company, he stated: “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 more tricky for the newly retired.”
Due to mortgage and debt issues, commentators have stated that the number of people releasing equity from their homes is likely to increase during 2017.
