The total amount of debt owed by over-55s is set to lift by 37% to £402bn over the next decade, as many retirees struggle with mortgage repayments, credit card debt and the rising cost of living, according to More2life.
Most of this debt is held by younger retirees aged 55 to 64 “who are typically still working while repaying mortgages and supporting children”, says the report by the later life lender in conjunction with consultancy the Centre for Economics and Business Research.
It adds: “Total debt held by this group is expected to rise from £196bn last year to £210bn in 2022. Indeed, half of 55 to 64-year-olds say that they are currently in debt or have been in the past five years, equating to 4.4m people.”
The study says that unsecured debt among the over-55s grew rapidly from less than £20bn in 2015 to over £25bn in 2019 but contracted slightly over 2020-2021 as spending reduced during the pandemic.
But the report adds that unsecured debt is expected to rise by over 34% in 2022, reaching £20bn, “as the cost-of-living drives many to borrow to make ends meet. Currently, almost 40% of retirees have spent more than they receive in income in some months in 2022, with 8% saying this often or always happens, which will likely only rise further as this debt level increases”.
It says that those aged 55 to 64 are most likely to have larger unsecured debt levels in 2022, with the average credit card debt of those with debt standing at £2,800.
Other types of unsecured debt levels are expected to average £10,700 per individual with debt. Higher interest rates are unlikely to deter this rise in unsecured borrowing in the short term, but by the next decade should see the total amount plateau at £19bn.
More than one in five, or 22%, of over-55s said that they had credit card debt in the past five years which they had not paid off in full each month, equating to 4.7m people, the study says. The second most common type of debt was an overdraft, with 9%, amounting to 1.9m people, with the report noting that they had used this solution over the same period.
More2life chief executive Dave Harris says: “Debt, whether it be a mortgage or credit card debt, is a fact of life for many people and allows them to achieve goals such as homeownership.
“However, with 40% of retirees already finding that their monthly outgoings outweigh their income, it is likely to quickly become a burden for some as the cost-of-living crisis continues.
“Over-55s are expected to borrow £22bn more than they did last year which is likely to be driven by higher interest rates and rising inflation. Servicing this borrowing will have an impact on those older people who are already on fixed incomes and may be providing some financial support for their families.
“While individuals need to consider how best to manage their own finances as they get older, it is vital that they consider all their assets. Living in a property you own but being too scared to turn the heating on and dreading a visit to the supermarket makes no sense at all.”
More2life’s 2022 report research was carried out by data group Opinion Matters between 11 and 17 March and surveyed the responses of 1,000 UK adults aged 55 and over.