Telegraph.co.uk – Tuesday 4th June 2013
The traditional image of older people as being reluctant to take on debt and determined to live “within their means” has come under strain partly because of a more relaxed attitude to borrowing from the so-called “baby boomer” generation, it concludes.
Declining returns from savings after the worst downturn since the Great Depression and the effects of the reliance on interest-only mortgages have also played a part, it finds.
Joint research by Age UK and the International Longevity Centre (ILC) found that, while fewer older people are borrowing on credit cards or other means than before the financial crisis, the average amount of debt they run up has risen by as much as two thirds over six years.
And the proportion of older people who are classed as having “problem” debt has risen to almost a third of those with borrowings overall.
Significantly, they noted that those struggling to repay debts were more than twice as likely to experience the breakdown of a marriage or long-term relationship as those who did not.
They also found significantly higher incidence of depression among those struggling to stay afloat amid growing debts.
Researchers tracked the experiences of more than 1,300 people over the last decade, using data from the English Longitudinal Study of Ageing (ELSA), which charts the lives of thousands of over 50s.
They found that the equivalent of 400,000 older people in the UK are paying more than £85 a week just to service unsecured debt while some have debts from unsecured lending of as much £15,000.
Overall 28 per cent of those older people who had borrowings in 2010 – or 1.1 million people – could be classed as having “problem” debts – defined in relation to the proportion of their income they spend servicing the debt. In 2002 only 23 per cent were struggling to repay.
Age UK warned that while older people are still less likely to rely on borrowing than younger people, there is now a small but growing group who are living with “nightmare” debts blighting their lives and putting strain on their relationships.
“Debt is commonly assumed to be more of a problem for younger people than for those later in life,” the report notes.
“Traditionally, older people are seen as living within their means and very reluctant to use credit or get into debt.
“However, low returns from savings, decreasing annuity rates and rising prices for energy and other basic costs are adding to the financial pressures on many in older age.
“There may also be generational effects, as those reaching retirement now are more used to credit cards and other forms of borrowing than older pensioners, and financial services have changed over time.
“For example recently, the Financial Conduct Authority has highlighted the large numbers of people approaching or in retirement with interest-only mortgages.”
Baroness Greengross, chief executive of ILC, said: “Without further intervention, problem debt will continue to blight the lives of older people – impacting on their relationships, quality of life and mental health.”
Michelle Mitchell, director general of Age UK said: “There is a small group of older people who are facing the nightmare of increasingly serious debt problems which doubles their chance of their marriage breaking down and can ruin their quality of life.
“While it is good news that overall debt among the older population is falling, this research, supported by evidence from other charities, sends a clear warning that funding for debt and money advice for older people must be protected and expanded.”