According to new research, many of the UK’s retirees are being forced to apply for credit in order to supplement their pensions.
One in five of those aged over 65 have either borrowed cash, or expect to do so, as their current economic situation means they are not able to afford their expected standard of living.
Whilst this news is a worry in itself, the report also found that due to age limits on credit cards and loans, over one in ten individuals aged over 55 had been rejected the credit they needed.
Research shows that many individuals coming up to retirement were relying – or trying to rely – on credit.
Around 22% of respondents in the Key Retirement Solutions report aged over 55 had applied for credit of some kind, with this number lowering slightly to 16% in the over 65 category.
Lastly, the report found that across the UK, only 43% of those aged over 55 were not in debt to any form of credit.
Key spokesman Dean Mirfin notes: “Nearly one in five over-65s expect to, or have already borrowed, money in retirement.”
Of these, many stated that their ability to borrow was of major importance to maintain their expected standard of living.
Whilst the recovery is going some way to help out the elderly, Mirfin cautioned that both low annuity rates and the chronic problems caused by mis-sold endowments mean pensioners remain under economic pressure.
Mirfin also went on to warn that people who enter the later stages of life requiring credit run a risk of being rejected.
12% of over-55s had been turned down for credit by lenders, with 70% of these rejections concerning credit cards.
This is due to a cautious financial market made wary of lending by the financial crisis, and the age limits many banks impose on personal loans.
Key’s research showed that a normal borrower under age 65 would have the choice of 85 loans, however, for those aged over 65, only 44 loans were on offer.
A life in debt
A large percentage of respondents in the study also said they expect to enter their retirement in debt, the study found.
Many believe their debt is manageable, due to low interest rates they are confident will not increase.
Yet think-tank Resolution Foundation’s recent report warning of an impending debt crisis – as families borrow heavily and interest rates show signs of increasing in the coming years.
A Resolution Foundation spokesperson stated there is nationwide uncertainty on the growth of income and interest rates, “but under almost any plausible scenario there is going to be a big spike in the next Parliament in the number of households facing crushing mortgage payments.”
Yet “as yet, there is little sign of the political or financial establishment giving this the priority it deserves.”