26th March 2008
An increasing number of people are reaching state retirement age in debt, with a new extensive study by Help the Aged and Barclays revealing that 1 in 4 people approaching state retirement age have outstanding consumer credit commitments. Shockingly, these borrowers owe four times as much as their counterparts did ten years ago.[1]
While credit levels are on the increase across all age groups, the Charity is concerned about the impact this will have on pensioner poverty as new retirees face the double whammy of living on a fixed income while managing existing credit commitments. The report shows that unlike borrowers in other age groups, older people use credit cards to cover essentials such as the costs of bills or even to buy food.
Key outcomes of the report include:
* credit users in their late 50s and early 60s owe on average at least four times as much in unsecured credit as their counterparts did a decade ago;[2]
* a quarter of all people approaching state pension age have outstanding consumer credit commitments. Outstanding credit commitments increase the risk of financial difficulties by 26 times;[3]
* levels of credit use may already be forcing people to delay the timing of retirement;[4]
* half of households headed by someone in their 50s, one in eight over 60s (over 1.5 million) and 4% of people aged 80-84s (about 60,000) are still repaying a mortgage;[5]
* arrears on credit commitments are most common among people in their 50s and 60, but among those aged 70 or over, utility bills are the main area of financial difficulty.[6]
The research was commissioned from the Personal Finance Research Centre at Bristol University to support the work of a nationwide money management programme, called Your Money Matters, run by Help the Aged in partnership with Barclays. The programme offers older people free and impartial money management and debt advice. Your Money Matters helps people who are struggling with problem debt and those who are having difficulty managing their finances on a fixed income.
Since the Your Money Matters programme launched in November 2006, it has revealed a snapshot of the severity of this issue. Although the report shows that presently only a minority of older people suffer from problem debt, the 17 advisors across the UK are currently helping older people deal with £5,273,701 of debt. They have managed to reduce that debt by £1,423,478 and increase benefit take-up by £582,493.
Alan Hands, Barclays sponsorship and donation manager said: “This report underlines the importance of programmes such as Your Money Matters. We recognise that many older people are facing a range of financial difficulties and that dealing with money issues and debt can be very stressful. Through the Your Money Matters programme and the expertise of our volunteers, we hope to help lots more older people to overcome these difficulties and regain control of their finances.”
David Sinclair, Help the Aged head of policy said: “This report shows that there are some worrying trends in credit usage that could represent a debt crisis for those coming up to retirement. We know from working with older people suffering from chronic debt problems that even owing a relatively small amount of money can cause untold misery for those living on a fixed income.”
“Government support for services that promote financial education and tackle bad debt, such as the Your Money Matters programme run in partnership with Barclays, are the key to defusing this ticking time bomb. Help the Aged also recommends that the Government introduce automatic payments of benefits to those who may be eligible and that the Social Fund is radically overhauled so that it meets the needs of the poorest pensioners.”
