David Hayes and Sharon Collard, University of Bristol’s Personal Finance Research Centre

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While income in later life receives a good deal of policy attention, only recently has the impact of borrowing on older people’s lives begun to be seriously debated.

Our analysis of the Wealth and Assets Survey, based on over 18,000 survey respondents aged 50+, shows that about a quarter of the over-50s have at least some outstanding non-mortgage borrowing and each of them owes on average £4,500.[1] Levels of non-mortgage borrowing fall steadily with increasing age, meaning that those in their 50s and 60s are more likely to owe money than people in their 70s and 80s.

The double-edged pressures faced by people in ‘squeezed middle age’ help explain their use of consumer credit.  Having high fixed costs (e.g. rent or mortgage payments or dependent children) is a key driver of credit use among the over-50s.  And a low income or experiencing a drop in income compounds this further. People in ‘squeezed middle age’ also face new financial pressures that their own parents did not, such as supporting adult children in higher education, getting on the property ladder or paying for care for elderly parents.

With total unsecured lending rising steadily, there’s a growing need in an ageing society to understand why borrowing persists, and how older borrowers can be helped to prevent their debts escalating. Government has a role to play in making sure that ‘work pays’ for people of all ages, and should at least consider the effects of eroding financial safety-nets on debt levels and financial insecurity in later life. The relatively high levels of borrowing among people in their 50s have serious implications for the ability of current and future generations to boost their retirement saving in the crucial years before retirement - especially as those retirement savings now have to stretch further as we live longer. 

The long shadow of debt extends well beyond people’s financial wellbeing, however. There are very strong links between people’s financial situation and their mental wellbeing. Most strikingly, people in their 50s or older who say they find it very difficult to manage financially have almost eight times the odds of poor mental wellbeing compared with those over-50s who say they are living comfortably.[2] In other words, help people to be financially healthy in later life, and they also stand a better chance of a happy and healthy life all round.

[1] Andrea Finney (2013) Demystifying non-mortgage borrowing in older age: A longitudinal analysis. Published by the University of Bristol’s Personal Finance Research Centre and ILC-UK.

[2] Personal Finance Research Centre and ILC-UK (2014) Financial wellbeing in later life: Evidence and policy. Both reports are available from https://www.bristol.ac.uk/geography/research/pfrc/esrc/outputs/

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