Proportion of Retired Bankrupts Rising
- More than doubles to 7% of bankrupts in 5 years
- Problem may be worst in rural areas
- Gordon Brown’s complex benefits system partly to blame
The percentage of bankrupts who are retired has more than doubled over the last 5 years to reach 7% of all bankrupts in 2007, up from just 3% in 2002 according to research from Wilkins Kennedy, the Top 30 accountancy firm.
That would put the total number of pensioners who have become insolvent at approximately 7,900 over the last year, up from just 900 in 2002.
Wilkins Kennedy says that this trend is set to continue as increased life expectancy puts greater strain on the limited savings of pensioners whilst hikes in the price of food and fuel piles on short term pressure.
The research confirms the experience of Wilkins Kennedy’s insolvency experts that increasing numbers of pensioners are unable to meet debt repayments when their income shrinks back on retirement.
Gordon Brown’s complex pension credits mean many pensioners miss out on benefits
Wilkins Kennedy says that the rise in the proportion of bankrupts who are retired may reignite arguments about whether benefits for pensioners are too complex.
Gordon Brown’s complicated tax system and the pension credits system introduced in 2003 have left many pensioners unaware of the benefits they could be entitled to. Research suggests that more than 50% of pensioners are not receiving all the benefits available to them, resulting in an estimated £2 billion worth of unclaimed benefits each year.
Keith Stevens, Insolvency Partner at Wilkins Kennedy comments: “More and more pensioners are going bankrupt as they struggle to repay debts when their pension is their sole source of income.”
“Although attitudes towards bankruptcy have changed dramatically since the days of debtors prisons the older generation still feel the stigma of bankruptcy and are reluctant to ask for help until it’s too late.”
“At the same time they are often unused to being offered high level of credit and may take on unmanageable levels of debt without considering how they will make repayments when their income falls back on retirement.”
“More often than not pensioners who go bankrupt are not homeowners and have few assets to fall back on when they reach retirement.”
Life expectancy and rural areas
Adds Keith Stevens: “Rising life expectancy is putting additional pressures on pensions and some actuaries have suggested that by 2015 a 65 year old man could expect to reach 90 years of age.”
Keith Stevens says that they also saw a higher than expected concentration of bankrupt pensioners in rural areas.
Explains Keith Stevens: “It may be that this is because they are unable to save on private transport costs through the use of free public transport. There will also be less opportunity for pensioners to undertake part time work, for example in the retail sector, in rural areas.”
“Any significant solution to this problem is a long way off. The retirement age rises to 66 in 2024 but that is 17 years away. It will be many years before the new age discrimination legislation has a really meaningful impact on employers’ recruitment of employees at the older end of the spectrum. Those approaching retirement age and who wish to continue working may still come up against ageism.”
“The rising cost of private healthcare can also come as a blow to pensioners who may be forced to sell their home in order to fund specialist care.”
Wilkins Kennedy says that divorce can often hit people’s finances hard and that those who divorce later on in life can sometimes struggle to get their finances back on track before they retire.
Research from Alliance Trust reveals that pensioners have been hit hardest by rising inflation over the past four years and have calculated that the rate of inflation for over-75s usually runs at between 0.75% and 1% above the inflation rate for average citizen (The Consumer Price Index increased by 1.8% in the year to August).
Keith Stevens says: “Pensioners are often forced to spend a great proportion of their income on necessities and have felt the impact of rising petrol prices through higher energy bills, and escalating food prices far more severely than the rest of the population.”
“Those who do not have index linked pensions may find that they are unable to maintain their standard of living but pensioners who are unable to scale back their spending on retirement may find that they run into financial difficulties very quickly.”
UK’s debt problem looks set to worsen
Keith Stevens believes that those who have entered into a cycle of remortgaging their homes in order to pay off credit cards, enabling them to run up the same debts again and again may now find that their debts are catching up with them.
He comments: “Even before the Northern Rock crisis banks were already tightening up their lending criteria and raising their mortgage rates as the credit crunch really begins to take hold.”
“This could signal financial disaster for those who have refused to reign in their spending despite all the warning signs.”
Ends.
Press Enquires:
Keith Stevens
Corporate Recovery Partner
T: 01784 435 561
