18% 'will retire in debt'

24 January 2013

Almost one in five people (18 per cent) who are set to retire in the coming 12 months will do so with some level of debt still hanging over their heads, according to a new report.

Data collected by Prudential for its Class of 2013 research showed of those planning to retire in 2013, there will be outstanding debts on average of £31,200 each.

But for those who are going to give up work and head into retirement with no remaining debts, they could be in a strong financial position for the rest of their lives.

Homeowners

Some homeowners who are aged between 55 and 95 might wish to look into products such as equity release to free up some money from the value of their property, which they can then spend on home improvements, helping out friends and family or paying for a holiday.

Vince Smith-Hughes, Prudential's retirement income expert, explained the study shows there has been a fall in average debt owed by this year's retirees and described these figures as a "welcome sign" that individuals are increasingly paying off their debts before retiring.

"But when people's finances are still under pressure, with expected retirement incomes at a six-year low according to our Class of 2013 study, it's important to ensure debt repayments do not eat into retirement incomes too much or for too long," he said.

Equity release plans could be used by those homeowners who want to clear off all their debts and secure their financial futures in their retirement.

Debts

Prudential's research indicated that of those who are planning to retire with debts, 56 per cent owe money on credit cards and 43 per cent still have a mortgage.

But for homeowners who have already paid off their mortgage and now own their house outright, equity release could prove to be an appealing option.

Duncan Rawlinson from CQS-accredited Linder Myers solicitors recently advised those considering such products to take independent financial advice before making a decision.

Those who want to find out more about equity release plans and how they can improve a financial situation can get in touch with Key Retirement Solutions.