Aged debt
As the number of people becoming insolvent breaks new records, there is growing evidence that debt is moving up the ages and becoming an issue for older people.
There are two ways for an individual to become insolvent – bankruptcy and an Individual Voluntary Arrangement. With an IVA you agree to repay a proportion of the debt – usually around a quarter or a third – and the rest is written off. IVAs have one big advantage over bankruptcy – they allow homeowners to keep their property as long as the agreed repayments are made.
A record 113,089 people took one of these routes in the last twelve months. That is 44% up on the previous year and the numbers are still rising with the first three months of this year also breaking the record for a quarter. It was 24% up on the same period in 2006 at 30,075.
The Government does not produce an age breakdown. But debt consultancy Thomas Charles says those over 55s are more than twice as likely as younger people to consider insolvency as a way out of their difficulties. It bases this view on research commissioned from the pollsters YouGov which also found that almost one in three (32%) of over 55s surveyed who had debts found problems with the repayments either quite frequently or every month. That was more than twice the proportion of 18-24 year old debtors reporting such problems.
That research is supported by an analysis of nearly 300,000 people who went for help in 2006 to the Consumer Credit Counselling Service (CCCS), a charity which helps people deal with debts. It found that the average amount owed by clients aged 18 to 24 was £12,790 while the average debt of those aged 60 or more was £31,867. Nearly one in twelve of CCCS clients are over 60 and that proportion is growing rapidly – up from one in 20 just two years ago. Chairman Malcolm Hurlston notes "There was a trend for older people, particularly those aged 60 or over, to take on more debt; the debts of young people decline"
Even the Bank of England is concerned about debt among older people. In its latest Quarterly Bulletin it says "The growth in debt in recent years has been associated with a substantial change in the distribution of debt as middle-aged households (35-54 year olds) have tended to borrow more, possibly to keep up with rising house prices, while younger households (18-34) have borrowed less, possibly because they have not yet entered the housing market."
Debt is still a minority problem among older people – the Bank also found that the over 55s own the most assets which amount on average to well over £100,000 each including their home. But the number who owe more than they own is growing and the older you are the harder it is to deal with a debt.
Expect to see more about debt and older people in the next few months.
Paul Lewis
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