Elderly will die with debts

Rising living costs and reduced earnings are depleting savings of elderly, report reveals

One in seven baby boomers now hitting retirement never expect to be debt-free, according to a report by Aviva which reveals that one in three over-75 year olds have crippling credit card debts averaging £3,370 a head.

The first generation with access to easy credit - Barclaycard introduced the first credit card in 1966 - will also be the first generation to take large debt to their graves, the report suggests.
The Aviva Real Retirement Report found that pensioners in debt now typically have a credit card, plus a personal loan of £5,983 and a store card with an outstanding balance of £1,200, yet every month they also go overdrawn by £2,202 on their current account.
Aviva has for the past year been tracking the incomes and lifestyles of the over-55s, and paints a picture of deepening debt levels among the elderly as they struggle with the rising cost of living and reduced earnings.
The average over-55 year old now has a monthly income of £1,236, a fall of 4% on the £1,284 figure a year ago. Many are eating into their savings pot, or adding on to their mortgages, to finance their lifestyles.
The mean mortgage debt for over-55s rose by £10,000 to £65,107 over the year, while the proportion of older households with less than £500 in savings jumped from 21% to 30%.
Many blame the cost of their children's university fee, and weddings, for going into debt. But others blame themselves, with 13% saying they had overspent on holidays.
Aviva found that over-55 households are now cutting on entertainment and holidays to help pay for rising food and petrol bills.
"One in seven households can't see a way out of debt," says Aviva 'At Retirement' director Clive Bolton. "The picture our report reveals is concerning, as while incomes have fallen and savings grown smaller, mortgage debt has increased and inflation has hit key expenditure pressure points."
But the report disputes the widely-held belief among older age groups that their inflation rate is higher than that for younger people. For over-55s in the year to February 2011, the increase in the retail prices index was 4.35%, slightly lower than the 5.1% experienced by the wider population. The amounts spent on housing is significantly less than younger age groups, as they tend to have smaller mortgage, but increases in rents are hitting the elderly who don't own their homes. High food price inflation - currently 6.2% - also affects as groceries make up their biggest weekly expense.
But amid the gloom there is some optimism about a future financial recovery, albeit some years away.
"We don't have precise proof of this, but there seems to be a sense that the recession, which people were very worried about a year ago, now looks like a more familiar recession, that the world hasn't ended, and that this is more like a recession that people have experience before," said Bolton.
The Aviva report is based on online interviews with 5,700 UK consumers aged over 55 between February 2010 and 2011.