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People retiring in 2016 will typically have £3,000 less debt than those who ended their working careers in 2015, according to research carried out this month by Prudential. The company discovered that one in five people retiring in the UK in 2016 (20%) believe they will be in debt, and will owe an average of £18,800.
However, this is around £3,000 – or 14% – lower than the typical debt of £21,800 recorded last year.
Average debts held by men are generally unchanged at around £19,600; however, women retiring in 2016 will owe around the £17,800 figure, representing a huge fall of £7,000 compared to contemporaries of 2015.
The main source of debt for people retiring in 2016 was money on credit cards; just over half (51%) retiring with debts had a proportion of money on plastic. However, only one in three (33%) were still to pay off mortgage debt – another steep fall when compared to 2015, when closer to half (43%) of survey respondents said they had to pay off their home loans.
Those with debts in 2016 believe it will take an average of three and a half years to pay off what they owe, though 13% said it will take seven years or more. Perhaps the most worrying statistic uncovered by Prudential was that 8% – around one in 12 people – said they doubted they would ever be free of debt.
One in four people settling down after working in London and the South West have debts, making these regions most likely for money owed by retirees. Conversely, the North East had the lowest chance of retirees debt, with 7% of people needing to pay off credit, mortgages and other debts.
Retirement income expert at Prudential Stan Russell said of the findings: “The average amount owed by retirees has been falling since long before the pension freedoms came into being, so we have to assume that other factors have been encouraging people to pay down their debts before they give up work.
“However, our results show that the new freedoms are giving a helping hand to retirees who are keen to balance the books – 15% of those taking cash from their pension savings this year are doing so to pay off their mortgage while 12% are clearing unsecured (non-mortgage) debts.”
- Author bambooloans
- Posted 24 March 2016