Kate Hughes: Society is beginning to learn about the human cost of debt
Saturday 31 July 2010
The trickle of good news pointing to economic recovery means many of us are looking forward to improvements in our money situations, from the potential for a new job to improvements in investment returns. It certainly feels like things are getting better, so the news this week that a father facing bankruptcy killed his family and himself is particularly affecting.
Just a few days earlier, research from the UK's leading debt charity the Consumer Credit Counselling Service (CCCS) reported that debt problems have far more negative impacts on their clients' lives than we might imagine, often because they have fought to keep their worries a secret. Only a third of debtors had shared the problem with their partner. Ten per cent of people said they told nobody, giving reasons such as "shame", "embarrassment" and "it's quite difficult to acknowledge that you are an adult and unable to manage your finances". The charity found that relationship breakdowns, nervous breakdowns and even heart palpitations are not uncommon.
And just to be clear, this is a largely a legacy of recession, not of extravagance. Only 15 per cent of people had a debt problem because of overspending, but almost half had run into the red because of redundancy, a pay freeze or reduced working hours, a relationship breakdown or having children.
"This busts the myth that recklessness with credit is the main cause of debt problems," says Delroy Corinaldi, of the CCCS. "Rather, it is life itself, over which we often have no control. Such people need practical support to guide them through this crisis."
While it is not surprising that debt problems have a negative effect on people's lives, the extent of the human misery uncovered in the survey is shocking. "There is a lot of focus on the economic implications of the personal debt crisis but we are only starting to understand the human cost of debt problems," Mr Corinaldi adds.
Speaking of life happening to you, the great and the good of the pensions world have got together to work out ways to help combat the effects of rising inflation on retirement income. It's a timely question given the latest predictions for further hikes in the retail and consumer prices indices – the official measures of inflation – and plans announced last month to abolish the obligatory annuity purchase at age 75. The problem is, for those retiring imminently, high inflation will compound the effect of falling annuity rates as we live longer. Twenty years ago a pension fund of £100,000 would have secured an annual income of £15,600 for life. Today it buys just £5,860.
Many people don't realise that they will face a considerable drop in their living standards because of the potential for inflation to rise, warns Chris Evans, CEO of MGM Advantage. "It is important that retirement income is backed by real assets that can keep pace with that inflation challenge.
"The open market option [which allows people to shop around for the best annuity rate] should be the default option at retirement," suggests Tom McPhail, head of Pensions Research at Hargreaves Lansdown. "It could make a huge difference to people taking control of their pension fund. But the biggest problems are lack of engagement and comprehension."
This is a real bugbear of mine. Thanks to the recession, we are now a society that increasingly shops around for the best bargains, and over half of us have made a conscious decision to seek out the best deals in this "age of austerity", according to Santander. We can do it with food, electrical appliances and car insurance, but when it comes to comparing the best annuity deals there is a huge and very expensive block.
Of course your current provider is hardly going to be keen on highlighting the fact that you could take your pension pot elsewhere for a better deal. But the reality is that it could add 30 per cent to the value of your retirement income. Financial difficulties are hard enough when you're of working age as we've seen, and climbing out of that pit while you're earning is tough. But having money worries in old age is disastrous. And far too many of us are sleepwalking into just that situation. www.cccs.co.uk
Kate Hughes is a freelance financial journalist.
- 1 Tidal launch: The most pretentious lines from Alicia Keys' valedictory speech
- 3 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 4 Tidal: Jay Z's Spotify rival streaming service criticised for making wealthy artists even richer
- 5 Brixton squat flats now costing up to £3k per month show how out of control rent is in London
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
Revealed: Putin's army of pro-Kremlin bloggers
iJobs Money & Business
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...
£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...
Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...
Day In a Page
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000