Time bomb facing pensioners

Statistics show that 1% of all people retire wealthy, 3% can afford to retire, 4% need to keep working, and most of the rest are on social assistance. There was a time when you owned your home by retirement, and could look forward to a few years of relaxation and playing with grandchildren.

People still dream of that fairy-tale retirement dream despite the fact that it has been debunked time and again over the last fifty years.

The statistics show a more sombre future for today’s working class. 

More UK’s pensioners will need debt relief services or IVAs.  Instead of retiring to a comfortable home they will be fighting to keep the heat on for the entire winter.

A report by Key Retirement Solutions states that one in four people over 60 still hold a substantial mortgage debt.  The average person retires still owing £31,000.

The report shows that the longer people live, the farther in debt they grow.  Typically, people aged between 60 and 63 owe £23,512, while those who surpass their 70s owe £37,000.

"With the rising trend in higher levels of borrowing, and fewer people saving for retirement, this could be a time-bomb waiting to hit the next few generations of pensioners even harder than we’re seeing now," explained Dean Mirfin, the business development director at Key Retirement Solutions.

"Key Retirement Solutions’ findings demonstrate the very difficult situation a sizable number of pensioners find themselves in, trying to cope with debt repayments as well as rising living costs," added Chris Tapp, the associate director of charity Credit Action.

Mr Tapp added that more people could have to seek debt consolidation or IVAs in the future, as "we see people borrowing more, borrowing for longer and saving less".

Statistics from Charity, Credit Action, show that many parents now expect to leave their children a debt as their inheritance.  Mortgages are now written to expedite switching the debt from parents to children.

The problem is compounded by the fact that the inflation rate for pensioners is adjusted to almost 11%, far higher than the national average of 2.7%.  This is due to the increase in utilities, medical expenses, and costs that are specific to pensioners.

The Pensions Commission says that 11.7 million workers do not make any contribution to a private pension.  This is alarming.  How do they expect to pay their bills when only 4% of the population will have enough money to retire?  What are these people thinking?

Credit Advice also claims that half of Britain’s pensioners are cutting back on luxuries, like food, to pay yearly fuel bills that average £1,100.  A survey by uSwitch claims that two million over-60s spent more than a tenth of their income on fuel.

People should look around their local community to see how people are living. If more than 26% people over 65 need to borrow to pay Council Tax then what are the prospects for those who are currently 50 years old, or 40 years old?

Only 28% of UK consumers polled believe that their current retirement savings are enough.  The rest of us are repaying debts or saving for a holiday (45%).

And 39 per cent of the 35.4 million working population are members of a private pension scheme.  This is down 40 per from 2003/04.

What does this all mean?  It means that the 70% of us who are not saving for retirement are going to be ‘up the creek without a paddle.’  We are hoping that the younger generation, who are still in public school, will figure out a way to not only build their own lives, but finance our retirements, keep hospitals open for us, and figure out a way to lower heating costs.  This is a little far-fetched, as the cost of education will be so high that these children will be close to retirement before repaying their student loans.

Even if we do find a way to retire above the poverty line, our own ignorance will hinder our ability to retire comfortably, unless we learn to use the system better than the current generation.

Debt charities are telling the elderly to claim their entitled benefits.  According to some reports, pensioners are missing out on billions of pounds.

Age Concern states that many pensioners could pull themselves out of poverty and dramatically improve their quality of life if they would only claim their benefits.

There is £1.4 billion in council tax benefit that fails to reach pensioners across the UK with 2.2 million people missing out.  I am not sure about you, but you are cutting your own throat by not helping your parents find this money.  It could mean the difference between inheriting a house or a mortgage

Age Concern’s director general Gordon Lishman said: "Rocketing household bills over the past few years have put a major strain on the finances of many pensioners, yet up to £4.2 billion in money benefits is left unclaimed by older people every year.

"It is really worrying that some of the poorest and most excluded older people are missing out on money that is rightfully theirs because they don’t know that they are entitled, are worried about the complexity of the process or are embarrassed about claiming."

Official statistics show that 50 percent of pensioner population live on 15,000 or less a year, with 1.4 million pensioners living on 5,000 or less. After paying for council tax and utility bills, they live on 257 per month. Key Retirement Solutions’ analysis found that the average pensioner is paying a 215 a month mortgage debt, leaving them with 42 left to live on.

The time bomb may be closer than most people believe.  Many adults are already being forced to support their parents instead of buying a home.  This number is growing steadily.