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Retiring in Debt?

When it comes to retirement, things have changed radically here in the UK in recent years as we grow used to a much larger proportion of people over 65 and the extension of the retirement age in recent years.  With improvements in health care and lifestyles, we’ve gone from 14.2% of the UK population over the age of 65 in 1976, to 18% in 2016, with a projection of 24.7% of the population being over 65 by 2046.  This has huge implications for the economy as life expectancy continues to increase while the proportion of children declines.  The population of the UK is transforming – the proportion of people of working age is shrinking while those of pensionable age is on the increase.  This will increase pressure on our economy as it struggles to deliver sustainability in providing social services such as healthcare and housing.

While retirement was traditionally something that was looked forward to – an opportunity to sit back and enjoy the fruits of one’s labour, financial worries are becoming the biggest negative aspect of retirement.  Those who were looking forward to spending more times on activities they enjoy, spending more time with family and enjoying holidays abroad, it’s often the case that those who have retired are unable to afford to fulfil their dreams of retirement.

Traditionally, reaching retirement age meant that the mortgage would have been paid off, leaving more disposable income but the housing booms have put paid to that plan for many.  Some people have carried on moving up the housing ladder to more expensive premises while others may be remortgaging their homes in order to provide children with help to get onto the property ladder, meaning that rather than spending a retirement free from debt, they are still struggling to make ends meet on a pension.

A recent survey of 2,500 retirees has revealed that many retirees are feeling that things are out of control – especially when it comes to health and loss.  Providing the ultimate flexibility in retirement will be a challenge and it’s clear that many retirees want more financial flexibility in order to regain choices and control of their lives.  Whether they are borrowing money, repaying it, spending it, taking a lump sum retirement package or drawing an income, they want financial products that work for them, not against them.

So many of our elderly people in the UK are falling into debt nowadays, and a whopping 40% of retired, interest-only borrowers are struggling with their mortgage repayments, many of whom would have expected to have paid off their mortgage by this stage of their lives.  These high levels of debt are not caused by overspending but due to a combination of inadequate savings, unexpected bills and the launch of pension freedoms.  Moreover, credit card and loan debt is preventing more than 20% of retirees from enjoying their retirement as they struggle to maintain their living standards.  Secured and unsecured debt in retirement is on the increase and more than half of those surveyed claim that one of the biggest issues they face is car repairs and emergency house repairs which often lead to these unexpected bills having to be paid via credit card.