One in five people retiring this year will be in debt, according to the Prudential’s Class of 2018 survey, owing an average of £33,900.
This figure is close to 40% higher than the average debt of retirees in 2017. It is also a worrying 80% higher than the low of £18,800 recorded by the Prudential in 2016.
However, while the size of debts is growing, the positive news is that the number of people retiring in debt has fallen from 25% last year to 19% this year.
The average retiree in debt doesn’t expect to get back into the black for another three and half years with typical repayments of £285 a month.
Outstanding mortgages and credit cards are the most common form of debt for this year’s retirees. Two in five (38%) are still paying off home loans while just over half (53%) have credit card debt.
Commenting on the findings, Vince Smith-Hughes, a retirement expert at Prudential says: “At a time when the base rate is expected to rise, it is worrying to see the rapid increase of a pensioner’s average debt. Interestingly, there is a smaller number of people retiring in debt, but for those pensioners retiring in debt, the amount owed is on the rise.”
Earlier this year, Prudential revealed that retiree’s expected incomes have risen to a new high of £19,900 a year.
Mr Smith-Hughes adds: “Given forthcoming retirees’ expected income has increased for the fifth year in a row, it’s possible that some people feel more comfortable about servicing debt, and are borrowing more. Meanwhile more and more grandparents are helping their grandkids with university fees and children with house deposits.
“However, debt repayments will take a substantial slice of monthly retirement income which will make budgeting tougher at a time when most people will see their income drop as they stop work. It is not always possible to be debt-free at retirement but many people will benefit from the free information available from Pension Wise, preferably before the time comes to give up work.
“To ensure that any pension savings are dealt with appropriately the free government guidance service is proving beneficial for people coming up to retirement wanting to know their options. Many will also benefit with a consultation from a financial adviser.”