Worrying new research shows the amount of debt held by over 65s will jump £8 billion this year alone. Here's what to do if you have problem debt and need to clear it.
Retirees and the growing debt mountain
Brits aged 65-74 are taking on more debt at an alarming rate, according to worrying new research from the Centre for Economics and Business Research.
While total debt stood at £78 billion at the end of 2017, this is predicted to rise to £86 billion by the end of 2018, which would represent an increase of £8 billion.
And as the graph below shows, rising debt in over 65s is by no means a new trend.
The research, which was commissioned by equity release lender More 2 Life, included all forms of secured and unsecured debt in its calculations.
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 annuity income. Or you might just be making savvy use of cashback or 0% credit cards.
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 nine 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.
Carry on working / Go back to work
It’s not the answer most older people want to hear but working, even part-time, means you still have an income still 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.
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.
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.
Take a look at the money transfer best buy tables for other deals as, if you can clear the debt sooner you might be able to get a card with a shorter 0% window but a lower fee.
If you have credit card debts, you could get an interest-free period of up to 36 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 around £5 billion a year by not claiming all the benefits they’re entitled to.
The GOV.UK Benefits Adviser can help you find out if you’re eligible for benefits such as Pensions Credit, housing benefit and Council Tax benefit.
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.
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. But 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 who can provide free, confidential debt advice. We've listed them in Where to get free debt advice.
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