Debt from cradle to grave?

9:57am Monday 18th August 2008

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A couple of years ago Age Concern warned that debt levels among the UK’s “middle age” population was increasing.

Not only had the debt charity, the Foundation for Credit Counselling, found that more people over 60 were even more in the red, but that those in the 40-59 age bracket had the highest level of debt. Then, the figure stood at an average £34,456 per person, and there wasn’t even a credit crunch in sight.

Today, a new report from Key Retirement Solutions, an independent equity release specialist, paints an even worse picture.

It claims more than one in three in the 55-65 age group have “outstanding unsecured debts” and could be heading for retirement £11,000 in the red. And that just comes from credit cards and personal loans. It excludes paying off the mortgage; bring that on board, and it comes in at an average £48,000.

Chris Tapp, director of the charity Credit Action, believes many of these new pensioners fell into the “buy now, worry about it later” culture when they were in their 40s and 50s.

“For many pensioners today these figures show it’s a case of ‘bought then, worrying about it now’,” said Mr Tapp.

“With the cost of living increasing dramatically – particularly as winter approaches and fuel costs mount up – it is vital that those struggling are given the help they need to ensure they aren’t trapped by debt.”

But Barbara Williamson, chairman of the Colchester Pensioners’ Action Group, wonders at some of the report’s findings. While agreeing that those who have just reached their 60s would be part of the credit card culture, she is surprised that those in their 70s have an average debt of £10,659.

“It is very difficult for many people in their 70s and 80s to make ends meet – particularly with soaring food and fuel prices – but I am surprised that anyone around that age will have got into debt either by spending on credit cards or buying goods on HP (hire purchase),” declared Mrs Williamson, 70.

“For those born before the Second World War, HP was an anathema. So was debt. If you couldn’t afford it, you waited until you could.

“That was drilled into us.”

But with credit so easy and the APR (annual percentage rate) meaningless to most of us, it is easy to see how even the 70-plus age group would have succumbed – especially if their private pensions didn’t turn out how they should.

“The recession of the early 1990s affected one of my pensions,” Mrs Williamson revealed. “I had had it for 30 years and it should have been worth £35,000. I ended up with between £3,000 and £4,000.”

A similar thing happened to her PEP (personal equity plan) turned ISA (independent savings account). In March last year, it was worth £13,000. By October it had dropped to £11,000.

“It isn’t that older people have not invested,” she pointed out. “But, as for everyone else, those savings and investments depend on market forces. Unlike other people, though, if there are shortfalls, they don’t have jobs to fall back on.”

But the problem of debt is not just taking hold when people hit retirement age. It is happening long before.

Essex University has just come out rather well in a survey by Push, a company which collates information for UK students. This particular survey was carried out to find the university which offered the best deal on debt.

The result was a bit topsy-turvey – the universities with the lowest predicted student debts for living expenses appeared at the bottom of the list. Essex came 130th out of 136th. Which isn’t bad, but students still have a minimum £6,000 debt on graduation, something their parents never had.

This probably accounts for the huge leap in debt for twentysomethings. The UK’s first Debt Worry Index – put together by the online organisation reallyworriedaboutdebt.co.uk – shows men living in Essex and under 25 now owe an average £12,000. Fifteen years ago, debt in this age group was less than a quarter of that figure.

And it doesn’t get any better as we get older, especially not in Essex. By the time they are 45, men owe £41,000 – the largest age-related increase in the UK – while women in this age group owe £37,000, £9,000 above the country’s average.

“The research gives a graphic, alarming picture of the state of debt in the UK,” pointed out a spokesman for the Debt Worry Index.

“For example, 31 per cent of people are highly unlikely to ever be able to pay off their debt – and having children increases debt by a quarter.”

Whether instant credit, a must-have lifestyle, rising prices, the economic situation or a culmination of all four is to blame, one thing is for certain. Debt is now very much cradle-to-grave.

DON’T PUT IT OFF – GET HELP

All debt charities say the same thing – if you are heading into debt, don’t put off getting help. Age isn’t an issue.

• Consumer Credit Counselling Service (CCCS), one of the UK’s leading debt charities, freephone helpline from 8am to 8pm Monday to Friday 0800 138 1111, or write to Consumer Credit Counselling Service, Wade House, Merrion Centre, Leeds LS2 8NG
• Colchester Citizens’ Advice Bureau, 5-7 Sir Isaacs Walk, Colchester, CO1 1JJ. Drop in between 9.30am and 12.30pm Monday-Friday. Telephone service Monday-Friday, 2pm-4pm, 08444 77 08 08