Debt is becoming a growing concern for UK adults approaching retirement, with 48% of over 55s having ‘some sort’ of outstanding debt.
These figures, part of a new study from Aviva, also show that almost one in ten of adults in the UK – just over 5 million people – ‘haven’t got a clue’ how much they owe, with this number rising to more than one in six in those aged over 45.
The most common type of debt is credit card debt, affecting 30% of over 55s, followed by personal loans and then overdrafts. More than one in 10 (11%) say they have outstanding mortgage debt, and 10% say they have unpaid household or utility bills.
Almost a third of Brits said that they had had to pay an unexpected bill of £850 or more in the past 12 months, which ONS attributes to the cost of living crisis and the ongoing financial impacts of Covid. Only 24% said they used emergency savings to cover this bill, with 19% saying they used a credit card to pay off what they owed, 11% saying they asked family or friends for help and 8% having used a loan or their overdraft. A further 5% said they took out a payday loan, and another 5% cashed in some of their pension savings.
It’s not necessarily the end of the world if you are approaching retirement with a certain level of debt, but it can certainly have a detrimental impact on your financial security during what is supposed to be a relatively stress-free period, as debts can accumulate interest, eat into your pension, and of course, be a huge mental strain.
Alistair McQueen, Head of Savings and Retirement at Aviva said: “Interest rates have risen to levels we haven’t seen since 2008 – and are expected to rise further. The cost of debt is now centre stage, and millions may be having to rethink their retirement plans.
“Starting to think and plan further ahead as early as possible is a small step that can make a big difference in the long-term. Individuals can take some positive actions to reduce their debt before entering retirement, such as consolidating their debt, paying off high-interest loans or switching to a cheaper rate, alongside reducing unnecessary expenses or taking out a debt management plan.
“Also, if appropriate, people could work with a financial advisor to create a full retirement plan that takes their debt into account and ensures that they have enough income to cover their expenses and enjoy their retirement years.”
With one in five people saying they expect to carry some level of debt into retirement, you may want to start planning or seeking advice to see if you can ease your situation. One positive trend Aviva observed was that more people (13%) said they were seeking advice from debt services or helplines, compared to just 7% in 2021.
You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.
If you’re thinking about getting independent financial advice, financial services company Fidelius is offering Rest Less members a free initial consultation with an independent financial advisor to chat about your finances, where you are now, and where you want to go.
There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved. Fidelius is rated 4.7/5 from over 1,000 reviews on VouchedFor, the review site for financial advisors.
Help with higher mortgage repayments
Rising variable rates and a scarcity of competitive fixed rate deals over the past few months mean that mortgage repayments have become extremely challenging for many homeowners. If you are struggling with mortgage debt, it could be worth exploring your options to see if there are any ways you can reduce your costs.
Our article Eight ways to manage higher mortgage payments looks at some ways you might be able to approach rising repayments.
One option some homeowners may consider is using equity release in order to free up some cash and pay off their home loan, but equity release rates are also currently high, and it definitely won’t be right for everyone. It’s also essential to seek professional advice if you’re thinking about taking this route. Read more in our article Should you use equity release to pay off your existing mortgage?
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
What to do if you’re struggling with debt
Unfortunately, given these exceptionally challenging times, many people may feel as if they’ve exhausted every option, and that their debts are now impossible to manage. More than one in 10 (15%) of people with debt told Aviva that they feel their debts are out of control or say they can’t pay them off, rising to 18% among those aged 45-54. However, it’s important not to suffer in silence if you are struggling with debts – it’s not something to be ashamed of, and you may be surprised at the number of resources available.
There are several charities and organisations that can help you negotiate debt repayment plans with your creditors, including:
- Citizens Advice – 0800 144 8848 (England) 0800 702 2020 (Wales)
- StepChange – 0800 138 1111.
- National Debtline – 0808 808 4000
- PayPlan – 0800 280 2816
The Government’s Breathing Space scheme, introduced in 2021, gives people temporary legal protection from their creditors if they are struggling with debt, so that they can seek advice and make a plan. You can find out more about it at GOV.uk.
You can read about more ways to take charge of your debts in our article How to take control of your debts. If you are concerned about the toll your financial situation might be taking on you, read our article Are money worries affecting your mental health? for some guidance.
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