Predictably, the most common form of debt in the latter age group have relates to credit or store cards, followed mortgages in the final decade before retirement. Although it’s not uncommon for people to enter retirement with some level of debt, such as credit card, mortgage debt or car loans, Aviva, authors of the study behind these figures, say this can have a significant impact on retirement plans and financial security as it can lead to increased stress and reduced income in retirement.
“Interest rates have risen to levels we haven’t seen since 2008 – and are expected to rise further, said Alistair McQueen, Head of Savings and Retirement at Aviva. “The cost of debt is now centre stage, and millions may be having to rethink their retirement plans.
“Starting to think and plan further ahead as early as possible is a small step that can make a big difference in the long-term. Individuals can take some positive actions to reduce their debt before entering retirement, such as consolidating their debt, paying off high-interest loans or switching to a cheaper rate, alongside reducing unnecessary expenses or taking out a debt management plan.
The findings reveal that the total amount of debt has increased for almost half of UK employees in the past 12 months. At the same time, people have strengthened their efforts to get out of debt.
The biggest proportion of working adults (38%) said they had cut back on non-essential monthly spending, such as luxury goods, holidays and entertainment. More than one in four worked overtime or got a second job, while 15 per cent said they had sought advice from debt services or helplines.
Over the past 12 months almost a third said they have had to pay for an unexpected, but necessary, bill of £850 or more – this is one of the figures the ONS say is a characteristic and measure of financial vulnerability following the impact of Covid on cost of living.
And although more than half say they have emergency savings to pay for such things as car or boiler repairs or events such as as weddings, only two in ten used it.
The rest used a credit card, asked family or friends to help, took out a loan or went into their overdraft. One in sixteen resorted to taking out a payday loan and a further five per cent say they cashed in their pension to pay for any sudden and surprising costs.
