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One in four people is approaching retirement with thousands of pounds worth of debt because they cannot meet the rising cost of living. Nearly half of over-55s are concerned about their depleted income, with one in eight now planning to continue working in order to bolster their income, a report claims.
'With unemployment figures estimated to reach two million by December, it is possible that pensioners will find it harder than ever to find work,' said Nigel Barlow of Just Retirement, the company behind the research. 'The likelihood is that poverty among pensioners is set to spiral out of control.'
Essential costs such as gas and electricity have surged by more than 40 per cent this year, meaning that disposable income is shrinking fast. Instead, over-55s are increasingly relying on credit cards, loans and overdrafts to pay their bills. The average credit card debt for the age group is now just over £8,000, according to separate figures from Key Retirement Solutions, a rise of £800 from last year.
A spokeswoman for debt charity the Consumer Credit Counselling Service (CCCS) said the research tallied with its own experience. 'Our clients are getting older and poorer,' said Frances Walker. 'Last year for the first time more than half were over 40 compared with 44 per cent in 2005, while clients over 60 have the highest levels of debt, averaging nearly £30,000.'
The rising figures highlight the consequence of a generation that became used to living off debt, credit cards and unsecured loans. Those who took out the first available credit card in 1967 had expected to pay off their debts by their forties and fifties but have instead found themselves hit by a double whammy of both their children and their parents being financially dependent on them for longer.
'Add to these factors the rising cost of living and the credit crunch and you have a problem,' said Walker. 'And we know that once you are retired it is very difficult to clear your debts.'
Many retirees will struggle to manage on a rapidly shrinking pension that will have to cover rising living costs as well as pay off debts. The charity Age Concern said that even pensioners who retired owing nothing have since turned to credit cards or loans to pay their bills. 'On the whole older people have historically been more reluctant to get into debt. However, our recent research has shown that hikes in household bills have pushed one in 10 of the poorest pensioners into debt,' said Gordon Lishman, director-general of Age Concern. 'There are also high levels of unsecured debt - such as credit card debt - among some people approaching retirement.'
More than half of older people are now cutting back on essentials such as heating and food, according to the charity, while more than a third of older people plan to live in one room of their home to save on fuel bills this winter, according to Help The Aged.
Despite increased living costs... up to £5bn in benefits is going unclaimed by some of the poorest pensioners because they don't know what they are entitled to ... are worried about the complexity of the process or are embarrassed about claiming.
Sheila Hanham, 69, didn't know benefits were available before she spoke to Age Concern. 'I had been trying to make do with very little for a long time and I was desperately worried about how I would get by as I got older. I just felt I couldn't survive,' she said.
She now claims pension credit and other benefits and used £3,000 in backdated money owed to her to clear the debt on her credit card, which she had been using to pay bills.
Lishman said: 'In the current economic turmoil it is important that adequate support and advice is given to the minority of older people who are in debt, and those who are at risk. Many older people will also be looking to the government to announce measures in its pre-budget report to help them with their finances.'
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