Pensioners are carrying the biggest debt burden

If you asked thousands of UK consumers which age group carries the biggest debt burden, the answers will be as varied as the people being polled, and most of them will be wrong.  While the average answer will probably be the 20 something generation, paying of their student loans, and trying to start a life, the actual group carrying the greatest debt burden is the over 60 age group.

Last year debt problems of the over 60s accelerated faster than all other age groups, while contrary to popular perception, the 20 something generation’s debt burden declined, according to CCCS’ Statistical Yearbook 2006 published March 2007.

Consumer Credit Counselling Service (CCCS) predicts that by the end of 2007 its counsellors will be helping more people over 60 than under 25, based on the current trends.   CCCS currently handles 10 percent of the individual debt cases in the UK.

The CCCS helpline inquiries increased by 50 percent to 300,000 in 2006 with 73,000 people needing extensive counselling from one of thir centres.  An extreme debt is one that exceeds £100,000, or where the case involves more than 16 credit cards. This is almost matched by Citizen’s Advice who stated they dealt with approximately 53 000 cases.

Commenting on the past year, Malcolm Hurlston, chairman of CCCS said:

“For the last few years, credit cards have been castigated for turning us into a nation of debtors but I wonder. With house-prices continuing to rise, matched by steep rises in mortgages and secured lending, I fear for the financial health of those stretching themselves ever further to step on to the housing ladder. Recent events in the US have shown us that owning a home at any cost is by no means the right financial decision for everyone.

“At the other end of the spectrum the increasing levels of debt among the over-60s has been a marked trend for the past 18 months and shows every sign of increasing. We are watching it with care.”
Last year, those in the 50 – 59 age group had debts of £32,886.  The over 60 age group had accumulated debts in excess of £31, 867.  While only 9 percent of the 18 – 24 age group needed help managing debt loads of £15,000.

This problem is compounded when you include the facts that the number of elderly people living alone has increased, with the bulk of this group being women.  This statistic itself could explain the escalating debt problem among this age group.

Statistics reveal an alarming number of women do not save for retirement, or have a pension plan, leaving them little to live on.     Even those who did save are being hit by a volatile stock market, fluctuating dollar, and low interest rates on savings.  Each of these eroding away the monthly income they expected from their investments.

Combine this with the fact that the inflation rate for the elderly exceeds4% - 10%, depending on the report read.  There is no hope for most of these people except to release the equity from their homes, or borrow money.

The impact of inflation differs for each age group. The rate of inflation for the 75 + age is 4.0%. Gas price inflation is now 22%, electricity inflation 16% and food rose to 6%. The 65-74 year olds have the second highest rate of inflation, at 3.1% which has not dropped below  3% since July 06.

Compare this to the under 30s age group at 2.9%, and you can see why it is difficult for the elderly to keep themselves out of debt. 

There are other causes for poverty among older people.  Recent reports claim that 70% of people fail to check their insurance policy.  Most elderly people have not updated their house insurance in years. Some find themselves unable to replace losses from fire or theft. 

Being scammed is another major reason for insolvency among this age group.  Look at the 150 homes in Spain.  They sold for top dollar, but will probably be levelled if the homeowners cannot incite mercy from the government.  Even a scam that is within the ₤10 000 - ₤30 000 can financially devastate a pensioner.

Others find that their life insurance policies, some older than 20 years, will not cover the cost of death, health issues, and eliminating debt.  In fact, most couples never consider eliminating the mortgage, credit cards, vehicles, or other debts when they take out life insurance.

According to the latest research by leading debt consultancy, Thomas Charles (www.thomascharles.com), problems with debt and the risk of insolvency increase with age.  Their research states that the 55+ age group is 167% more likely to go insolvent and 129% more likely to experience debt repayment problems than their 18-24 year old counterparts.

Part of the reason is that the elderly are afraid to report their problems, and the stigma of bankruptcy still leaves a sour taste in their mouth.