Credit Card Debt Risk For Pensioners

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March 15, 2010

CREDIT CARD DEBT RISK FOR PENSIONERS
• One in five over-65’s owe money on their credit cards with average debt of £8,967, says Key Retirement Solutions

Pensioners cashing in on the value of their homes owe an average of £8,967 in credit card debts, new research* from leading independent equity release adviser Key Retirement Solutions shows.

Its analysis shows one in five over-65 homeowners taking out equity release owe money on plastic with average debts increasing for the over-70s. Customers aged 65-69 owe an average £8,881 while the over-70s are £9,048 in debt.

Key Retirement Solutions, which analysed applications from 3,501 customers in 2009, warns that credit card debt is taking a substantial bite out of pensioner incomes with many over-65s unlikely to ever be able to clear their plastic.

The analysis comes as the Government announced plans, which come into effect in February 2011, to force card firms to clear debts at higher rates of interest first as well as banning rate rises and credit increases for people in financial difficulty and giving customers 60 days to reject rate rises.

Key Retirement’s analysis shows that pensioners making the monthly minimum repayment on a balance of £8,967 at an average 18.8% rate would pay £141 out of average gross pensioner incomes of £16,000.

That equates to 10% of monthly income before tax – but someone only paying the minimum would take 30 years and one month to clear the debt without spending any more on the card.

Bank of England*** figures show credit card lenders wrote off £4.1 billion of credit card debt in 2009 as borrowers defaulted.

Dean Mirfin, Business Development Director at Key Retirement Solutions, said: “Debt is a way of life for a substantial number of people and the over-65s are not immune. Many are perfectly comfortable with owing money on their credit cards and it can be a sensible way of planning for major purchases.

“However the over-65s are more at risk as once they retire they may no longer have the income to service the debt and in many cases to ever clear their credit card balance.

“Many of them do though have substantial wealth tied up in their homes which represents a potential source of income particularly when other sources of retirement income are under pressure from low interest rates and annuity rates.”

Key Retirement Solutions’ Pensioner Property Equity Index shows the over-65s have property wealth of around £765.18 billion after paying off mortgages and gaining from increases in house prices.

Research among its customers shows the average monthly payment on credit card debt is £238. Someone paying that amount would clear their debt within four years and seven months assuming they don’t continue to spend.

Around 48% of the customers it spoke to were aged 65-69 while 52% were aged 70-plus.

For anyone looking to release equity from their home to help ease the financial burden in retirement, key’s independent guide to equity release is the best place to start. This can be obtained by calling 0800 531 6010 or visiting our website https://www.keyrs.co.uk/free-guide where the guide can be downloaded.

Notes to Editors
* Key Retirement Solutions own database of 3,501 customers applying for equity release products in 2009

** http://www.nao.org.uk/whats_new/0809/0809961.aspx

*** http://news.bbc.co.uk/1/hi/business/8543083.stm

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About Key Retirement Solutions
Founded in 1998 Key Retirement Solutions is the leading independent adviser specialising in equity release. Key Retirement Solutions is a limited company registered in England No 2457440 with its Head Office at Key Retirement Solutions, Harbour House, Portway, Preston, Lancashire, PR2 2PR.Key Retirement Solutions is authorised and regulated by the Financial Services Authority.

For more information, please contact:
Dean Mirfin (Business Development Director)
Key Retirement Solutions
07879 678737

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