Debt has no boundaries and shows no respect for age and so it is not surprising that pensioners have debt. What is concerning however is that the amount of debt that pensioners owe is rising. A recent survey showed that as many as two out of every five pensioners find themselves in a position where they are struggling to meet their debt commitments.
To put the figures in perspective, twenty percent of pensioners owed over forty two thousand pounds which showed a significant increase over the previous year’s figure of thirty six thousand pounds. Increasing levels of debt is a more acute problem with pensioners as the vast majority of them are working on relatively fixed incomes that they do not have the potential to increase to any great degree. This means that in order to service their debts pensioners have to cut back on spending elsewhere.
Types of debt
The types of debt being incurred are very similar to the general debt profile of everyone else, with the main ones being loans, credit cards and mortgages. Credit cards cause a particular problem because of the high interest rates and once into the cycle of not paying off each month, it becomes very difficult for pensioners to get out of their credit card debt and unfortunately the debt tends to rise.
When you add to this some of the additional financial difficulties pensioners have faced in recent years such as declining returns on savings, reductions in pension incomes which for some has been severe and the more general problem of investments that have either failed to meet expected returns or have failed altogether, there is a cumulative and compound effect that can easily exacerbate financial problems and lead to serious debt problems.
Mortgages are also a specific problem for pensioners with more than one in ten worried about mortgage debt, describing their mortgage liabilities as a heavy burden. Extended term mortgages sold in recent years are also a part of the problem which pushed back the timescales within which people would normally have paid their mortgages off. There is also the looming problem of interest only mortgages which many pensioners have, meaning that whilst they make their mortgage payments each month, the amount that they owe does not reduce and this will have to be repaid at some point.
This has meant that many pensioners are pushed to enter into equity release schemes, which enables them to free up equity they have in their property which is then used to help them get out of debt and pay off their financial liabilities. Sales of equity release plans continue to rise as more and more pensioners use this as a way to clear their debt.
Professional debt advice
Seeking professional debt help and advice can sometimes be difficult for pensioners as there is a whole range of emotions they go through and many feel they should know better and should never be in the debt situation in the first place. This in an illogical and overly critical way to look at things as debt affects everybody and doesn’t discriminate and in actual fact there is an argument to say that pensioners’ incomes have been more severely affected than others.
So the message to pensioners is that you are not alone in your problems with debt and there is help available so make use of it and contact a professional debt advisor if you’re experiencing any kind of difficulty.