£20bn debt burden weighs down Scotland’s pensioners

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Scotland’s pensioners are struggling with debts worth almost £20 billion, alarming new research has revealed, including thousands with mortgages still to clear.

Four in ten retirees in Scotland are in the red to the tune of £17,900 on average, according to figures produced by MGM Advantage.

The retirement income specialist found that 15 per cent of Scottish retirees are still paying off their mortgages, owing an average of £66,000, while 12 per cent have non-mortgage debts worth more than £5,000.

Retirees in Scotland collectively owe £19.3 billion on mortgages and unsecured debts such as credit cards and overdrafts, MGM estimated.

It said the research highlighted the scale of the challenge facing pensioners, who have seen their incomes eroded by a combination of inflation and low interest rates.

“These figures are alarming and show the pressure people are under on a daily basis trying to balance the household budget,” said Andrew Tully, pensions technical director at MGM Advantage.

“Although many people consider themselves retired, they are continuing to pay off their mortgage, some with quite substantial balances. Dig a little deeper and many people are working part time, sometimes through choice but often simply to make ends meet.”

The report was published just days after a leading debt charity reported a sharp rise in debt problems among over 60s. The average debtor in that age group going to the StepChange Debt Charity for help has credit card debts of more than £15,000. Over 60s also owe more money on store cards and bank overdrafts, said StepChange. And while they are less likely to use pay-day lenders, over 60s are more than half a million pounds in debt to pay-day lenders.

More than a third of its over 60s clients in Scotland are behind on their mortgage repayments, with higher levels of arrears than other age groups.

Sharon Bell, head of StepChange Debt Charity Scotland, said: “Whatever someone’s income level during their working years, most would expect to be in a stable financial situation when they are older.

“Unfortunately, we have seen a rise in the number of older people seeking help, and this age group is also holding higher than average debt levels.”

Many retirees have been left in financial difficulty by the failure of investments such as mortgage endowments. Thousands of Scots in or nearing retirement face endowment shortfalls averaging £65,000, over 50s group Saga said earlier this month.

And those stuck with debts in retirement may find them increasingly difficult to clear, one Edinburgh adviser has warned. William Hunter, director at Hunter Wealth Management, said: “If you have always lived at or just beyond your means when retirement looms, consumer debts can no longer be serviced.”

Debts such as mortgages were once cleared with the help of windfalls that have become harder to secure, he added.

“The recession means that lump sums aren’t what they used to be and even if you can sell your house the chances are that “downsizing” means moving into a better, small dwelling that costs about the same.”

The result is that for many retirees the days of being considered “whoopies” – well off older people – will be a distant prospect, said Hunter.