Our sixties should be about enjoying holidays and spending time with family and friends but it seems that many retirees are instead struggling with alarming levels of personal debt.
The average retired person has £8,180 of debt according to a study from MGM Advantage and 178,000 people are juggling debts of at least £100,000. Only 57 per cent of the entire retired population has no debt worries hanging over them.
"At first glance the figures do look surprising, but they are probably heavily influenced by the number of mortgages that now persist beyond retirement," says Joss Harwood from independent financial adviser Eldon Financial Planning. She attributes this in part to the increasing levels of parental assistance for children buying their first home.
The debt charity Consumer Credit Counselling Service (CCCS) says that demand for advice for the over-sixties has increased by 15 per cent in the past three years. It predicts this is the start of a long-term trend, as older people struggle to repay debts built up earlier in life.
There are steps that you can take to avoid this, however, including shopping around for the best annuity rate at retirement, rather than just taking the rate offered by your pension provider. You may also qualify for an enhanced rate for pre-existing medical conditions.
"It is vital that people shop around for the best annuity to maximise their income. The difference between the best and worst rates can be as much as 50 per cent" says Aston Goodey, a director of MGM Advantage.
You should also claim all the state benefits to which you are entitled – figures show that pensioners aremissing out on up to £5bn a year in unclaimed pension credit, housing and council tax benefits, as well as attendance and disability living allowances.
There may even be some old savings accounts and pension plans that you have lost sight of, in which case contact the Department for Work and Pensions' tracing service (dwp.gov.uk/ thepensionservice) or for lost savings accounts try unclaimed assets.co.uk.
Preventative action will make the biggest difference though. Switching from an interest-only to a repayment mortgage, for example, can help ensure you have paid off most, if not all of your mortgage before you stop working. Financial advice website Unbiased.co.uk says that one in seven UK households only pay the interest on their mortgage and risk being forced to downsize or continue to pay off their mortgage well into retirement. As we reported last week, lenders are also clamping down on interest-only, making it even more difficult for people to find similar options when they come to remortgage in the future.
"If you are on an interest-only mortgage, is there a way you can switch to a repayment mortgage? The earlier you can do this, the better, as a large outstanding balance when the mortgage term expires – often close to retirement – can come as a nasty shock," says Matt Hartley from CCCS.
Planning is to key to avoiding debt so the advice is to draft a budget by listing all of your monthly income and expenditure, including annual costs such as car insurance and road tax.
"If you are thinking ahead to retirement but have existing debts that you struggle to repay, it is essential to tackle these now," says Mr Hartley. "Start by prioritising what you owe, and pay off high priority debts, such as mortgage, rent or council tax first. Then see what you can afford to repay on other debts and contact your lenders to explain the situation."
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