How To Solve The Problem Of A Nation Of Aging Debtors?

2005 will be remembered as being the worst year on record for spiralling individual levels of debt in the UK. It was the year in which Mervyn King, Governor of the Bank of England, said that Britons’ spiralling levels of personal debt had now reached a level where it was conceivable that it could create economic difficulties. Worryingly, during the course of the year the average number of debtors in the UK rose by a quarter, with the average outstanding debt sum a staggering £15,000 per person.

All of this should be sounding alarm bells ringing. But the truth is, it only tells half the story. Separate the over-60’s, those closest to retirement age, from these statistics and the figures should be causing panic attacks:

– the average debt for an over-60’s person in the UK is an astonishing £33,500, more than twice the national average!

Without doubt then, Britain is fast becoming a nation of aging debtors. The question is: “how do we solve this problem?”

Never too old to get your finances in order

The first lesson in financial management that we have to remember is that you are never too old to get your finances in order. It is clear that more and more of us are borrowing today to payback tomorrow. What is also now clear is the fact that for many of us tomorrow has arrived! Thus, if you find that you're an over-60’s person faced with extreme financial difficult, the first thing you need to do is to speak with a financial adviser or credit counsellor with a view to undertaking a financial health check. It may very well be the case that you have not structured your borrowing in a way that ensures you are getting the best interest rates possible. It may also be the case that most of your debt is short-term, but causing immediate financial difficulties. Without seeing a financial adviser or credit counsellor, it would be difficult, however, to say whether you’re approaching your debt problems in the best way practicable.

Don’t ignore the problem – hoping it’ll go away

The worst thing anyone can do is to ignore that they have a debt problem. For anyone over 60, who has a debt problem, this rule has to go double. Without wishing to sound alarmist, you are nearing a time in your life when your income stream is going to be reduced, but where you would also like to have certain luxuries that you have looked forward to (and earned) in life. As such, if you have a large credit card bill, talk this through with your financial adviser and see if you can consolidate this debt or even pay it off with a re-mortgage of your home. Essential to the whole exercise must be making sure you get back to reasonable financial health as soon as possible.

Individual voluntary arrangement (IVA)

In a worst case scenario, you may need to consider signing up to an IVA. IVAs are legally binding agreements between you and your creditors which allow you to repay your creditors over a period of 5 years and during this time your creditors agree to freeze the interest being charged. While it may not sound ideal, it is far better to enter an IVA now than risk your pension of the future. However, given the 5 year span of an IVA, if this is what you do need to do, you need to be doing it sooner rather than later.

Bankruptcy

The repercussions of declaring bankruptcy in your 60s can be extremely severe. As such, it is strongly recommended that you do not take this course of action without first having talked through your financial problems with a credit counsellor or financial adviser.

Richard Smith
27th July 2006

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