"People are taking an average of three-and-a-half years to clear the debts they retired with – at a time when they should be enjoying an active retirement and worrying less."
More than one in three people retiring this year will face significant debt challenges, according to new research from Key.
Of those in debt, 48% still owe money on credit cards, 31% have an outstanding bank loan and 14% will still have a mortgage.
While the average amount owed by those in debt is £17,460, 8% owe over £20,000 and 4% do not actually know how much they owe.
One in eight of those in debt expect to owe money for nine years or more with a third of them saying they will never pay off the money they owe.
Will Hale, CEO of Key, said: “With changes to the state pension due to start coming into effect this year, it is vitally important to understand the challenges and aspirations of the 'Retirement Class of 2020'. Today’s findings suggest that while most people work hard to retire debt-free, this is not the reality for one in three people who need to consider how they can service and repay over £17,000 in borrowing from their retirement nest egg. Even those with generous incomes may find this a stretch and people are taking an average of three-and-a-half years to clear the debts they retired with – at a time when they should be enjoying an active retirement and worrying less.
“Equity release is not right for everyone but it is vitally important that people are not prevented from considering how their largest asset, their home, can support them in retirement by misconceptions and unanswered questions concerning later life lending options. There is a lot of help available online on how to budget for retirement and working with a financial adviser in the run-up to retirement can make a massive difference in being as retirement ready as possible.”