How to deal with debt
Some 18% of those planning to retire this year will have outstanding debts which on one hand is slightly down on last year – the figure was 20% in 2011. But the amount of debt individuals owe in increasing with the average amount owed totalling £38,200 compared to last year’s £33,100.
Mortgages and credit card bills account for the majority of the amount owed and those who will be retiring in debt will pay £260 on average in monthly repayments.
The study found that men are more likely than women to be retiring in debt and typically owe substantially more (£45,300 compared with £29,400).
Retiring with outstanding debts could be a sign of a lack of financial planning. It is important therefore for those still at work to save as much as possible as early as possible, and to consult a financial adviser to help them plan for a comfortable retirement.
Getting advice and help is key to getting out of debt before it spirals. Addressing the issue yourself first will help. Spend a few hours writing down everything you owe and the most sensible thing to do is pay off the most expensive debts first.
It's much better to attack such a problem head on because banks and other kinds of lenders much prefer that their customers communicate with them.
If you can, restructure your finances so you cut the cost of borrowing, perhaps by consolidating loans or taking advantage of 0 per cent interest offers.
Cutting your outgoings and using the money to pay off debt faster will help.
If you want to start by doing some homework yourself, a free online financial health check service is available from the Money Advice Service (www.moneyadviceservice.org.uk/healthcheck).
The online aide, which is designed to help plan personal finances and deal with debt problems, asks a series of direct, multiple choice questions and uses the answers to produce a personal action plan.
The plan can suggest ways to control your spending, make the most of savings and ensure that finances can cope with a change in circumstances.
If you want some professional advice but can’t spare the cash to pay for it, there are several independent debt charities operating in the UK that do not charge for their bespoke help. The Consumer Credit Counselling Service (www.cccs.co.uk or call 0800 138 1111) or National Debtline (www.nationaldebtline.co.uk or call 0808 808 4000) can will assess your debt problems and arrange amended repayments to any creditors.
Those with more serious problems may need to make formal agreements with creditors such as a debt management plan.
This is a simple formal agreement between struggling borrowers and lenders on a more realistic repayment schedule than originally agreed.
Debt advice companies help by talking to the various creditors on their clients' behalf.
The aim is to persuade lenders to freeze interest and to cut repayments, which are then made over a longer period to make them more affordable.
There are many companies offering such a service but only the charities will do so for free.
The other option they can recommend is an individual voluntary arrangement (IVA). This is a legally binding repayment plan for those with debts of at least £12,000. If payments are missed, bankruptcy can be enforced.
IVAs typically last for five years during which time fixed monthly payments must be made.
Borrowers cannot escape paying fees to set up an IVA (even charities will charge), although costs do vary.