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One in three are retiring in debt in 2020

Your Money
Thursday 20 February 2020
Most of us have an idea of how we’d like our retirement to be. How to fund it, though, is often a different question. You may have been a modest saver over the years and have a reasonable income to cover your day-to-day expenses, but what if debt repayments are holding you back from being retirement ready?
With the State Pension Age due to start moving to 66 for men and women this year, the question of how to deal with debt in retirement is becoming a bigger conversation than ever before.
One in three retiring in debt
We undertook a unique study* into the finances and ambitions of 1,000 people who are expecting to finish full-time work in 2020. The nationwide study showed that those retiring this year face significant debt.
Out of the one in three retiring in debt this year, the average owed is £17,460; the amount taking on average three-and-a-half years to clear. However, one in eight expect to owe money for nine years or more.  Of those in debt, 48% still owe money on credit cards, 14% have an outstanding bank loan and 31% will still have a mortgage.
Using the wealth tied up in your home
Currently, over 65s in the UK have more than 1 trillion pounds worth of unmortgaged housing equity and increasingly homeowners are using equity release to unlock the tax-free cash tied up in their home to help fund a better retirement.
A lifetime mortgage is the most popular form of equity release and is a loan secured against your home. You should always think carefully about securing a loan against your home. There are typically no monthly repayments to make, as the loan plus roll-up interest is repaid when the plan comes to an end. The amounts people release vary starting from £10,000, with Key customers having access to £90,000 on average in 2019 - you can release up to 56% of your home’s value depending on your age and lifestyle.
We always encourage discussing your decision with family. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. However, some of Key’s plans offer a guaranteed inheritance feature, allowing you to protect a percentage of your home’s future value for your loved ones.
Understanding your options
It’s important to consider your options when it comes to retirement financing and increasingly property wealth is becoming part of that.
Key’s CEO Will Hale said: “It is vitally important that people are not prevented from considering how their largest asset, their home, can support them in retirement.”
* Research conducted by Research Plus between 18th and 31st December 2019 among a sample of 1,000 people expecting to retire during 2020
Page last updated: Tuesday 03 March 2020