Retired and still in debt? How to pay off what you owe

Updated on 13 June 2022

One in three Brits are retiring in the red, worrying new research shows. Here's what to do if you have problem debt and need to clear it.

Retirees and the growing debt mountain

One in three Brits who retired last year did so with huge debts.

That's according to research from retirement firm Key, which found that those retiring in the red owed on average £20,650.

That’s an increase of £3,190 on the 2020 figure, showing that while the number of people going into retirement owing money hasn’t changed, the scale of their debts has jumped sharply.

It highlighted how they expect to take around three-and-a-half years into retirement to clear their debts, though around a tenth (11%) said they had no idea how long it would take to pay off those debts.

This increase in debt isn’t a new thing, either. Previous studies by the Centre for Economics and Business Research found Brits aged between 65 and 74 collectively owed more every year since 2013.

And of course, with energy and fuel bills soaring, it's unlikely the pressure on retired household finances is going to ease any time soon.

Not all debt is bad 

We should stress that it's not always a huge problem to be retired and in debt.

For example, you might have taken out a small loan to improve your home that can easily be covered by your existing pension income.

Or you might just be making savvy use of cashback or 0% credit cards that you then clear every month.

That said, it's generally best to avoid being deep in the red when you're in or nearing retirement. 

If you find yourself in this boat, here are some steps you can take to get back in the black.

Use your savings or pension

If you do have savings, it usually makes sense to use them to pay off your debts rather than carry on paying higher rates of interest. That’s particularly true right now as savings rates are so terrible.

Read: what the pension freedoms mean for you

Carry on working / Go back to work

It’s not the answer most older people want to hear but working, even part-time, would mean you still have an income coming in.

Of course, there’s the small matter of finding a job and the costs associated with working, such as transport, but if you are able to find a job that pays a decent salary then it is definitely worth considering.

Make cutbacks

You might already have cut back as far as you can. If you haven’t, and you’re struggling, then it’s time to take a look at your household budget.

Write down all your spending for a month and take a look at areas where you might be able to save money.

For example, can you use your car less, or stop eating out? It’s tough, but short-term pain can reap long-term gain.

And can you save money by switching your home insurance, car insurance and other household bills such as your home phone?

Spend an hour or two shopping around and see if you can save.

Pay less for your debts

If you have debts such as bank overdrafts, credit cards or store cards, see if you can switch to a cheaper deal.

Or you could pay it off with an interest-free money transfer credit card.

Right now, MBNA is offering 0% money transfers for up to 18 months with a fee of 2.99%.

The smart thing about a money transfer card is you move some of your card’s credit limit into your bank account, basically moving your overdraft into a credit card debt, that hopefully doesn’t charge interest.

Alternatively, if you have credit card debts, you could get an interest-free period of up to 33 months with a top 0% balance transfer card.

If you have a personal loan, you may be able to switch to a cheaper loan elsewhere. Just be aware of any early repayment or other charges you might incur if you move.

Claim all your benefits

Research suggests that pensioners are missing out on huge sums each year by not claiming all the benefits they’re entitled to.

There are a few different independent benefits calculators that can help you find out if you’re eligible for benefits such as Pensions Credit and Housing Benefit.

It’s worth having a look at Entitled to or Turn2us for help establishing what you may be eligible for.

Read more in our guide to all the perks, tax credits and benefits available to older households.

Track down old pensions

If you think you have an old personal or company pension that you’ve lost track of, you can use the Department of Work and Pensions’ free Pensions Tracing Service.

You might also want to have a read of our guide to tracing old pensions to learn more about how the process works.


Saga equity release calculator (Image: Shutterstock - loveMONEY)If you could live comfortably in a smaller home, then downsizing is definitely an option.

If you really need to raise some money then moving away to a cheaper area could pay off your debts and perhaps provide a small nest egg.

But bear in mind that if you’re moving to somewhere unfamiliar you will need to make friends all over again and you could be far away from close family.

You don’t have to sell your home to downsize – you could rent it out and rent a smaller place.

Just make sure you tell your lender.

You can find out more about this in How to rent out your home.

Take in a lodger

Alternately, you could stay where you are and rent out a spare bedroom (if you have one, of course).

Under the Government’s Rent a Room scheme, you can earn up to £7,500 a year tax-free from renting out a furnished room in your home.

Seek free debt advice

You don't need to suffer sleepless nights worrying about your debts.

There are a variety of organisations out there that can provide free, confidential debt advice. We've listed them in this guide to getting free debt advice.


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