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"BABY BOOMERS" BUILD UP DEBTS NOT PENSIONS, WARNS NEW REPORT

The 'baby boomers' whose coming of age coincided with the birth of the credit card[i] are running up more debts in their 50s than previous generations, according to new research.

The research, published jointly by Consumer Credit Counselling Service and Age Concern, analyses patterns amongst different age groups seeking help with debt. It shows that people in their 50s not only owe more in total (just under £20k non-mortgage debt) than younger clients but they also owe more relative to their income - more than 20 times their net monthly income on average.

What's more, over indebtedness levels for the over 50s seeking help with debt appear to be getting worse and could impact on their ability to save for retirement. Government figures suggest that three million people are seriously under-saving and up to 10 million should consider saving more. [ii]
At a time when the Government is considering whether people should be forced to save into private pensions, increasing financial pressures such as the cost of care, funding children's university education and the consequences of redundancy leave many over 50s building up bigger debts rather than pensions.

The research is based on an analysis of 21,000 client records of those people who sought help from CCCS over the five years since 1998.[iii] While younger people are more likely to seek help with debt problems, its main findings are that people in their 50s:

borrow more than younger age groups: in 2002/3 the average unsecured debt for those in their 50s was £19,845 compared with £14,701 for those under 50.
face higher levels of debt stress i.e. the amount they owe relative to their income: on average the debt income ratio for those in their 50s was 20.37 in 2002/3 compared with 14.38 for the under 50s.
fall deeper into debt, both in absolute and relative terms: in the five years to 2003, the debt-income ratio for people in their 50s had leapt by more than twenty per cent to 20.37, while the under 50s ratio had risen by under four per cent to 14.38.

These findings suggest that when it comes to debt, the generation known as the baby boomers may be following its usual practice of over-turning social norms. As they approach retirement, some of the baby boomers are unlikely to conform to the conventional stereotype of older people being careful with money and avoiding debt.

Malcolm Hurlston, CCCS chairman commented:
"The baby boomers are taking on more debt in their 50s than previous generations. This could be due to a number of factors including: a higher expectation of retirement, redundancy, a lower than expected retirement income or simply a different attitude to debt. This generation would have seen "Live Now Pay Later" as teenagers and lived through the launch of Barclaycard and Access.
"We wait to see whether they will carry this extra debt with them into retirement."
Gordon Lishman, Age Concern's Director-General said:

"This research offers a valuable snapshot into the attitudes of the next generation of pensioners. Older people have historically been reluctant to get into debt but some of the next generation of pensioners appear to have quite different attitudes.

"With the Government switching the emphasis from the State to the individual to provide for later life, retirement is likely to come as a shock for those who are not saving enough. Many people are not in a position to save more or cannot afford to shoulder the risk. It's time for the Government to take control of the pensions crisis and commit itself to improving the state pension system."

As CCCS is a charity offering free advice, the data set consists of borrowers who have recognised they have a debt problem and have sought help. However the large number of cases analysed suggests that this provides a good indicator in borrowing behaviour. Out of the 21,000 records examined, 2,400 were for people in their 50s.

The data set excludes non-mortgage debts in excess of £100,000, as these may often include trade debts, or in some other way be atypical of the normal borrower. Debt-income ratios in excess of 300 are also excluded for similar reasons.

[i] Barclaycard was launched in 1966.
[ii] Simplicity, Security and Choice: Working and Saving for retirement, Department and Work and Pensions (DWP), December 2002.
[iii] Although all those included in the survey have debt problems, in terms of income levels, the CCCS client base, which is very large, is a good match to the credit card population. It is therefore likely to be a reasonable indicator of the wider borrowing behaviour.

 

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