Experts underscore value of seeking specialist advice
New research from equity release lender more2life has revealed an upward trend in borrowing by the UK’s over-55s, who are expected to borrow £22 billion more in 2022 than last year.
According to the new report, which is a collaboration between more2life and the Centre for Economics and Business Research (Cebr), the total amount of debt owed by over-55s will rise to £294 billion this year, up from £272 billion in 2021 and £209 billion in 2017.
This means that debt among older UK adults has increased by 41% in five years, with this figure expected to soar even further over the next decade, to £402 billion by 2032.
If forecasts hit the spot, total debt for over-55s will rise by a whopping 92% in just 15 years.
more2life said most of this debt is held by younger retirees aged 55 to 64 who are typically still working while repaying mortgages and supporting children.
Total debt held by this group is expected to rise from £196 billion last year to £210 billion in 2022. Unsurprisingly, 50% of 55- to 64-year-olds said that they are currently in debt or have been in the past five years.
The research also found that while unsecured debt among the over-55s grew rapidly from less than £20 billion in 2015 to over £25 billion in 2019, it contracted slightly over 2020 to 2021 as spending reduced during the pandemic.
However, unsecured debt is expected to rise by 34% in 2022, reaching £20 billion, as the cost-of-living drives many to borrow to make ends meet.
Currently, almost 40% of retirees have spent more than they receive in income in some months in 2022, which will likely only rise further as this debt level increases.
Those aged 55 to 64 are most likely to have larger unsecured debt levels in 2022, with the average credit card debt of those with debt standing at £2,800. Other types of unsecured debt levels are expected to average £10,700 per individual with debt.
The equity release lender said higher interest rates are unlikely to deter this rise in unsecured borrowing in the short term, but by the next decade should see the total amount plateau at £19 billion.
Also, 22% of over-55s revealed that they had credit card debt in the past five years which they had not paid off in full each month.
“Debt, whether it be a mortgage or credit card debt, is a fact of life for many people and allows them to achieve goals such as homeownership,” Dave Harris, chief executive at more2life, said.
“However, with 40% of retirees already finding that their monthly outgoings outweigh their income, it is likely to quickly become a burden for some as the cost-of-living crisis continues.”
Will Hale, chief executive at equity release adviser Key Later Life Finance, commented that this also raises the question as to whether people should be considering a wider range of assets as part of their retirement planning.
“We know that for most people, their home is their largest asset but whether they view it as more than a potential inheritance is often debatable. We need to be having these conversations with a wider range of people who could benefit from support from a specialist adviser and a better understanding of their later life lending options,” Hale pointed out.
Read more: Pandemic sparks surge in over-50s seeking advice.
Harris said that while individuals need to consider how best to manage their own finances as they get older, it is vital that they consider all their assets.
“Specialist advisers are ideally placed to help people explore all their options and understand whether a later life lending product such as equity release might be the support they need,” he added.
Stuart Wilson, chief executive at lending platform Air, echoed Harris’s and Hale’s advice to seek the help of specialist advisers.
“Whatever type of debt a person has, it is vital that they seek out expert advice in order to manage their finances and find out what support is available to them,” he said.
“Advisers are key here in making sure over-55s have the necessary information for a broad range of products so they can make an informed and educated decision, including whether to choose a later life lending product to augment their income.”