Brits set to retire in the red

More than 1 in 3 of the UK population over the age of 55 have outstanding unsecured debts and could be heading towards retirement with a whopping £66 billion in the red, averaging £11,106 per head, reveals a new report from Key Retirement Solutions, the leading independent equity release specialist.

The analysis based on 4,507 people in the UK aged 55 and over who released equity in their home with Key Retirement Solutions in 2007, reveals the average unsecured debt across loans, credit cards, and overdrafts to be broken down as follows:

Personal loans: almost one in four have outstanding loan payments owing £8,766 on average per head

Credit cards: a fifth have outstanding card debts and owe £8,358 on average per head

Overdrafts: just 3% are in the red, but £3,667 is owed on average per head

The situation worsens when taking into account the average outstanding mortgage debt which stands at £37,316 per head for this age group.

The greatest concern is that the further people reach in retirement the deeper in debt they seemingly become. The total unsecured debt for those aged 55-59 is over £2.5 billion and this takes on a huge increase of 747% reaching a total of over £22 billion for the over 70s, which is on average £10,659 per head with an average monthly payment per head of £244.

As voluntary pension contributions made by UK adults have almost halved in the past 12 months, and the costs of goods and services purchased by pensioners have rocketed by 36% since 1998 - faster than the rise in the Retail Price Inflation which has shot up by 32% over the same period - this is a trend which looks likely to continue for generations to come if their outstanding debts continue.

Dean Mirfin, Business Development Director at Key Retirement Solutions said: "As the cost of living is on the up, these figures, even if they are only part reflective of pensioners as a whole, are of real concern. Retirement should be a time to enjoy yourself after all those years of hard work, yet 1 in 20 people in their 60s, 70s and 80s admit to constantly struggling to keep up with financial commitments or having fallen into arrears.

"The cost of living for the elderly has surpassed inflation over the past decade therefore it is more important than ever that consumers are aware of the dangers of approaching retirement with such large amounts of debt."

Looking at credit card debt alone, the amount owed by those aged 55 and over reaches over £28 billion[5]. The average debt for people over 60 has reached £8,372 an increase of £821 year on year. As Britain's interest repayments have soared to £94.4bn in the last 12 months and more than five million people have missed monthly payments on credit cards in the past six months, incurring an average of £12 a time in late payment fees, this is one of the most dangerous forms of debt.

Chris Tapp, Director of charity Credit Action, comments on Key's findings: "In recent years there has been a ‘buy now, worry about it later' culture in the UK when it comes to borrowing, particularly on unsecured forms of credit. For many pensioners today these figures show it's a case of ‘bought then, worrying about it now.' With the cost of living increasing dramatically - particular as winter approaches and fuel costs mount up - it is vital that those struggling are given the help they need to ensure that people aren't trapped by debt but are given the necessary advice and support to enable them to stay in control of their money and their lives.

“For anyone looking to release equity from their home to help ease the financial burden in retirement, our independent guide to equity release is the best place to start. This can be obtained by calling 0800 531 6010 or visiting our website keyrs.co.uk where the guide can be downloaded."