The silent debt crisis among UK’s older workers

While the debt debate circles around the UK’s youngest adults, older generations are struggling

This is the public face of the UK debt crisis – debtors over 55 are being ignored

Debt. It’s the scourge of the 20-something. And the 30-something. But by the time we’re in our fifties and sixties, things have settled down a bit. After all, we’re coming to the end of a working, earning life in which we have the means to pay it back.

Except that’s not what’s happening.

Under-reported and often dismissed amid discussions over lucrative final salary pension schemes, house-price growth and even university grants, it seems the UK’s older generations are facing a silent debt crisis.

New research out this week shows credit card debt levels among people over-55 is soaring by almost 10 per cent a year. Data from Aviva shows overdraft borrowing for this age group is up 17 per cent in the last 12 months.

The problem gets increasingly worse the older we get. A recent study from Nationwide points to debt levels among 50-somethings of around £4,650, including £2,750 on credit cards, £1,300 through a personal loan and £390 on car finance, against an annual income of just over £19,000.

By their seventies, the 2,000 people Nationwide surveyed in that age group were reporting debt levels of more than £31,500, largely because of the £26,850 outstanding on their mortgages. Their annual income came to an average of £21,600.

With numbers like that, which could be down to a range of reasons – including gifting money to children, or taking money from property to fund retirement – those seeking help with problem debt are becoming older.

In June this year, 18 per cent of insolvency practice Creditfix’s clients were over 55 years old. By the end of September, more than 20 per cent were over 55.

And while the average debt level among all their clients last month was just over £20,000, among the over-55s the figure rose to almost £25,000.

“Some over-55s have been servicing interest on credit card debts through minimum payments for years without reducing the capital amount owed,” notes Keith White, director of IVA.com. “We have also seen one example of someone taking out their first ever mortgage for £200k over 15 years on their 60th birthday.

“Putting off repayments and taking on new debt at this age can be an enormous risk, as ill health or redundancy can scupper the best laid plans and result in unmanageable personal debts. Careful financial planning and getting on top of your debts early is the best option with least amount of risk,” he adds.

But Aviva’s data shows a huge difference between the debt levels of those in work and those who have already retired, with those still earning clocking up 75 per cent more debt than those who had stopped.

Indeed, among employees aged 55-64, more than two in five have had financial worries in the last year, and while a third are regularly borrowing money, almost one in every five is only paying the minimum on their debt commitments.

Almost one in 10 people in their fifties and early sixties who are still working say they feel financially out of control.

“At a time when those in that age group should be financially stable and able to cope and looking forward to the next phase in their life, we found that 31 per cent are borrowing to meet basic financial needs – while in full time work – and 44 per cent have fluctating incomes of more than 10 per cent every month,” warns Heidi Allan, head of employee engagement at Neyber, the company behind the study. “If they’re struggling to cope day to day while in full time work, their pension pots are not going to magically save them.”

But is it always their own fault?

“Those now turning 55 or older (in later life) are facing pressures that previous generations may not have to confront at this time of their lives,” argues Jeremy Over, director of Later Life Services at Spectrum IFA.

“The days of working for a single employer and accumulating a generous final salary pension are over, and those who have not planned sufficiently could be in for a shock when their personal pension values are not as high as they would like. This has pushed more over-55s to delay their retirement and continue to work well past the age at which they would have normally given up work.”

This is the so-called sandwich generation: those often coping with cost of care fees for their parents and the student debt and property ambitions of their children. It is also the generation swept up in interest-only mortgages and endowment policies.

“With an ageing population and an increase in interest rates looming, more must be done to ensure this demographic doesn’t face serious financial problems in retirement,” says Steve McNicholas, managing director of credit and marketing data for CallCredit Information Group.

“Lenders can help by making sufficient affordability checks both when someone applies for a loan, and more importantly throughout their customer lifecycle. This will ensure that should someone’s financial situation change as they age, for example when they retire, this will be flagged to the lender so that a more appropriate repayment plan can be agreed.

“This will not just prevent them from overextending themselves financially and protect their retirement income, but ultimately better protect our economy.”

“Maybe the future will see generations where an inheritance is not a reality, where households become multi-generational with children, parents and grandparents living together to support each other, a working life that runs into their seventies and an expectation to live past 100,” adds Over.

“All in all, the 55 and overs of today are the guinea pigs for the rest of us to learn how to cope with the later-life financial issues of supporting ourselves, our children and probably our parents.”