Tackling debts 'essential' before retirement

03/09/2009

People approaching retirement must make every effort to pay off their debts before they finish working as unlike those still in employment, they will not have the option of increasing their income once they start drawing their pension, a charity has said.

However, Becky Wilks of the Money Advice Trust said the credit crunch has given the savings and investments of many people in this group a battering, which could seriously undermine their ability to cut their arrears.

On top of this, many Brits approaching retirement have seen the value of their house fall in line with national trends, while equity release plans have become "a little harder to get".

The spokeswoman's comments come after research by Saga Group found that 49 per cent of people over 50 are currently using more than one credit card to manage their finances - although the firm said there is a "worrying lack of knowledge" about this risks this could pose to a person's credit rating, with just nine per cent saying they were concerned about the potential consequences of using multiple cards.

Elsewhere, a recent study by Scottish Widows revealed the debt burden of those already in retirement is getting worse.

Pensioners with a mortgage still owe an average of £7,344 on their home loan, up from £6,732 in 2008 and £5,930 in 2007.

Overall nationwide debt of people in retirement stands at £90.4 billion, compared to £72.3 billion last year.

EuroDebt director Kevin Still said: "EuroDebt has thousands of clients where one or both of the people on a Debt Management Plan is over sixty and are either retired or facing the prospect of retirement.

"EuroDebt's figures paint a much starker figure, with the average level of unsecured debt being £28,155 with seven creditors.

"Of equal concern is the fact that 32 per cent still have a mortgage. Over-60 couples with a mortgage owe on average nearly £40,000 to nine creditors.

"Not putting your home at risk is a key consideration when looking at viable debt solutions later in life, that is one of the major advantages of a Debt Management Plan along with the ability to deal quickly with changes of circumstances and income levels, for example after retirement."

Tags; Income Worries and Debt, Retirement Money Problems,

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