New research commissioned by wealth management firm, Old Mutual Wealth, has found that 19% of pensioners are taking advantage of new pension rules to pay off debts. The revised legislation, introduced in April 2015, offers new flexibility around how people can access their pension funds, with the average withdrawal currently standing at £28,000.
Key figures from the YouGov survey included:
- Around a third of people polled said they were in still in debt when they stopped working.
- Of this group, 58% still owe money now – 30% on mortgages and 28% on credit or store cards.
- Overall, the average amount owed was £34,000, with 19% of people admitting they owe £50,000 or more. A worrying 10% have debts of £100,000 or more.
- 21% of people reported having mortgage debt, followed by 14% owing money on credit and store cards, and 6% on personal loans.
- Only 17% of respondents said they were expecting to be in debt when they retired and just 9% thought they’d still have a mortgage in place.
Adrian Walker, Retirement Planning Manager at Old Mutual Wealth, commented: ‘We have become a nation comfortable with debt and this follows many people into retirement…This new data shows the harsh reality that many will not be able to release themselves from those ties immediately, as levels of debt are higher than they perhaps imagine.’
Andy Gorton, Managing Director of debt advisory service, Fresh Finance, adds: ‘With today’s living costs often outstripping incomes, it’s not surprising that many people are still repaying debt long after they’ve stopped working. However, this can cause big problems if a person’s income suffers a large drop after retirement – not everyone has a big pension pot to draw from. If you think you might end up in financial difficulty on retirement, it’s important to take action now.’
Top tips to maximise your income on retirement
- Shop around for the best credit deals. If you’re paying high interest rates on credit cards, loans or bank overdrafts, look around for a cheaper deal. It may be possible to consolidate all your debts on to a 0% credit card deal, enabling you to pay more back each month during the interest-free period.
- Look into any benefits you could claim now or on retirement. There may be benefits or tax credits that you weren’t aware of, but which could make a significant difference to your income. To find out more, speak to your local Citizens Advice office or visit gov.uk/browse/benefits. And don’t forget to look into free or concessionary travel passes – they could save you a fortune in petrol costs.
- Switch your utilities, insurance policies, phone, TV and Broadband contracts to cheaper providers. Use a price comparison website like moneyfacts.co.uk or www.comparethemarket.com to research and compare prices and deals. Be sure to consider providers who specialise in the over 50s market, such as Age UK and Saga.
- Be a smarter shopper. There are lots of ways to save money on your weekly shop. If you usually buy from one of the more upmarket supermarkets, give one of the cheaper ones a try. Switch to own or economy brands for everyday items. And look out for discounts, vouchers and special offers in store and online.
- Get professional debt advice. If you’re worried that you won’t be able to make ends meet when you retire, you need to tackle your debts head-on. The problem won’t go away on its own, so it’s important to speak to a qualified debt adviser about your options. Fresh Finance can help.