A THIRD of over-65s are struggling to manage debts as they head
into retirement – owing an average PS36,000.
Even more worrying is, the older people get the bigger the amounts
they still owe on mortgages, credit cards, loans and overdrafts.
Those aged 66 to 75 have an average PS48,647 outstanding on
mortgages, while the over 76s an average PS79,684.
When it comes to loans 66 to 75 year-olds owe an average PS10,653,
while the over 76s owe an average PS12,328. The figures for credit cards
follow the same pattern at an average PS8,493 for 66 to 75s and PS8,732
for over 76s.
This is the shockingly dire state of pensioners’ finances
revealed in Key Retirement’s latest report on the equity release
market.
The amount of cash unlocked from the value of homes soared to
PS394.8million in the three months to September 2014, up 32% on the same
time last year.
Equity release now plays an increasingly important role in helping
people to clear debt in retirement as pensioners struggle to find other
ways to access extra cash.
A third of people used cash from equity release to pay off credit
cards and loans, up from 30% in 2013 with 28% using released cash to pay
off mortgages, up from 23% last year.
Dean Mirfin, group director at Key Retirement, says: “These
latest findings reveal an increasing trend of debt into retirement.
“However, it is not through frivolous spending but, for many,
simply through rising costs for everyday living and many people being
faced with mortgages into retirement or interest-only mortgages and no
method of repayment in place.
“Finding extra money in retirement is harder then ever with
many lenders not prepared to offer mortgages beyond age 65 and other
credit options reducing in availability dramatically as people enter
retirement.
“It is for these reasons that equity release is providing a
vital solution to those needing a financial boost and the opportunity to
remove the heavy burden of monthly debt commitments through their
retirement.”
After years of hard graft and being sensible by putting a bit away
into a pension, retirement should be a financial worry-free time.
But pensioners have been hit hardest during the economic crisis as
incomes simply are not keeping up with escalating prices for the basics.
Pension pots have failed to produce the expected income as annuity
rates keep dropping and interest rates on savings have dropped to
pathetic amounts.
Equity release can be a way of boosting pension incomes and putting
a bit more cash in pensioners’ pockets, though it is not the right
move for everyone.
And it should not be the only option on offer, especially for those
heading towards retirement and trapped with an interest-only mortgage.
This time bomb won’t stop ticking until the industry gets real
and lenders are forced to come up with some interim products to help
people who are left with crippling debt.
While individuals have to accept responsibility for debt they have
built up, many took out interest-only mortgages without fully
understanding how they work or with the intention to switch to another
product that repaid the debt.
However, tough times and lean incomes have left many stranded – and
through no fault of their own.
Lenders have to take a bit of responsibility in these cases.
It was the lenders who flogged these products and allowed people to
take out these loans, sometimes for 100% of the value of homes. You
simply can’t leave some of our most vulnerable in an impossible
situation and with no affordable or sensible route out.
We have had many readers call with horror stories of how lenders
are forcing them to repay loans of hundreds of thousands of pounds, at
ridiculous rates over very short periods of time – with no sensible
discussion or alternatives.
That is not the way to get people out of this mess and ensure they
can keep a roof over their head in retirement.
HELP & ADVICE
Check you are receiving all the benefits you are entitled to. A
hefty PS3billion worth of Pension Tax Credit goes unclaimed each year -
that could boost pension incomes by an average PS56 a week. It’s
not an automatic benefit, you have to claim. Find out more from the
Pensions Service on 0800 99 1234.
Unlocking some of the cash tied up in your property through an
equity release plan could be a solution but it is not right for
everyone. It will reduce the value of your estate and could affect your
entitlement to benefits. Speak to a specialist adviser. Find out about
the pros and cons of equity release with our free guide by calling 0800
232 1307.
Speak to your creditors and see if you can arrange more affordable
repayments on debts. Ask if they will freeze interest, spread the debt
over a longer term or allow you to switch to a cheaper product.
Don’t struggle alone. You can get free debt help from your
local Citizens Advice Bureau. Visit adviceguide.org.uk, call the
National Debtline on 0808 808 4000, contact Stepchange Debt Charity on
0800 138 1111 or visit debtwizard.com.
WE UNLOCKED CASH AND PAID OFF OUR MORTGAGE
Retired industrial engineer David Bartlett and his wife Rae have
released some of the cash tied up in their two-bedroom bungalow to clear
mortgage and credit card debts.
“We had a chunk left on the mortgage, some credit card debt
and needed to update the car,” says David, 77.
“We decided there didn’t seem to be any point sitting on
cash when we needed it to make our retirement more comfortable and to
reduce the monthly bills. I’ve got friends who have died struggling
and with cash in the bank. I believe people should use all the means
they have.”
David, who lives in Alton, Southampton, has released a lump sum of
PS45,000 through an equity release plan with Key Retirement. He did that
so he could still leave bit of inheritance for his two daughters.
“We felt my daughters were already well provided for and
didn’t need to worry about them financially. We bought our home for
PS5,000 all those years ago, it was a smart move as it has provided a
roof over our head and will continue to do so for the rest of our
lives.”
“This time bomb won’t stop ticking until the industry
gets real.
CAPTION(S):
ON MOVE David and Rae Bartlett updated their car to keep their
caravan rolling
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