More pensioners are going bust because of low annuity rates and poor interest on savings.
Insolvencies among the over 65s have soared by more than a fifth in the past four years, says accountancy firm and insolvency specialist Moore Stephens.
Last year, 5,762 pensioners were declared insolvent, compared to 4,727 in 2009, which was the height of the credit crunch.
The rising number of pensioner insolvencies was in direct contrast to a 25% fall in the total number of personal insolvencies, which dropped from 134,053 to 100,389, over the same period.
The over 65s now comprise 5.8% of all personal insolvencies, compared to 3.6% of the total in 2009.
Moore Stephens points out the rising trend of insolvencies matches the four-year 0.5% Bank of England official interest rate that pulled the plug on bank savings rates and the government’s quantitative easing program that pushed down returns on gilts and bonds that are the underlying investments for annuities.
Other factors that have a major influence on pension incomes include:
- The rising cost of living, especially fuel bills
- Increasing life expectancy
- Borrowing on high interest credit cards and unsecured loans
All these factors combine to reduce the spending power of pensioners – especially as living longer cuts annuity rates to give a smaller pension income.
The over 65s, who should be in a reasonable financial position without debt at retirement, are finding their money does not go as far as they would wish, explained the firm’s David Elliott, an insolvency expert.
“Pensioners who have retired in the past few years have struggled more than most because of the financial straits the nation has seen,” he said.
“Now the economy is improving, those in work are seeing the benefits, but those locked into low pension incomes are still suffering. For many, bankruptcy or other insolvency solutions are the only way forward.”
Too much credit
Elliott explained paying off credit is a common problem for pensioners.
“Retiring with credit card or loan debt is one problem, but another is accessing equity from their homes to help their children settle their debts as well,” he said.
Insolvency covers a range of debt solutions, including bankruptcy, debt management orders, debt relief orders, individual voluntary arrangements (IVA) and administration orders.