"It is a worry that we’ve seen a big jump, not only in the proportion of retirees with outstanding debt but also the amount that they owe."
Retiring with debts outstanding is a problem that is on the rise, with the proportion of people retiring in debt at its highest level for seven years – jumping to one in four (25%), up from one in five in 2016.
The Prudential research found that 2017 retirees owe an average of £24,300. This is an increase of £5,500 or 29% since last year and the first time Prudential has reported a growth in retiree debt since 2012 when the figure peaked at £38,200.
Those who are planning to retire with debts in 2017, and expect to clear them, will take nearly three and a half years on average to pay them off – and the repayments will cost them an average of £230 a month. However, 16% expect to take seven years or more to pay off their debts and 7% fear they will never clear the money they owe.
Women planning to retire this year with debts owe slightly more on average than men at £25,700 compared with £23,400. However 28% of men expect to retire with debts outstanding, compared with just 21% of women.
Mortgages have also become a bigger source of debt for 2017 retirees compared with previous years. Nearly four in 10 (38%) of those expecting to retire this year with debt still owe money on property, up slightly from 33% last year. However, credit cards remain the major debt issue with 51% of those with debt still owing money on plastic at retirement.
Vince Smith-Hughes, retirement income expert at Prudential, said: “For most people the move from work into retirement will see them having to cope with a drop in their income. So having to use precious retirement income to pay off debts could make life even more tricky for the newly retired.
“With this in mind, it is a worry that we’ve seen a big jump, not only in the proportion of retirees with outstanding debt but also the amount that they owe. Many people will benefit from a consultation with a professional financial adviser to help get their finances in the best possible shape before they retire."