Baby Boomers face bust at last
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The post-war generation known as the baby boomers are beginning to face financial pressures just before they retire, for many the first they will have known in their lives.
This generation of people, now reaching their 60s, have had all the luck: rising house prices, free NHS medical care, cheap energy, final salary pensions (gold-plated and index-linked in the public sector), and free higher education.
However, a new report from Help The Aged and Barclays, with research by Bristol University’s Personal Finance Research Centre, says money worries are forcing many to delay retirement.
New retirees, it says, often face ‘the double whammy of living on a fixed income while managing existing credit commitments,’ because a quarter of all people approaching pension age have outstanding consumer credit commitments.
Half of households headed by someone in their 50s are still repaying a mortgage, as is one in eight over-60s. The picture on personal loans is worse. Credit users in their late 50s and early 60s owe, on average, at least four times as much in unsecured credit as their counterparts did a decade ago, says the report.
The report confirms a squeeze on older households which has intensified in recent months. The 65-74 and 75-plus age groups are seen by Alliance Trust as hardest hit by rising food, petrol and energy costs, and soaring council tax bills. It also throws a fresh light on the question of equity release, to unlock £1.37 trillion which over-60s have locked up in bricks and mortar.
Many financial advisers say equity release is a bid for security which some later regret. Once homeowners take equity release, it is extremely difficult, probably impossible, to buy another home. Some will see most of the equity in their home wiped out. The earlier you use equity release, the heavier the impact on your finances.
Leading providers of equity release plans including Prudential, Norwich Union, Standard Life, Stonehaven and Home & Capital Trust all belong to SHIP (Safe Home Income Plans) which operates a guarantee to ensure equity release cannot generate a debt greater than the value of the home.
Many baby boomers end up feeling that they have no choice but to use ill advised equity release schemes to provide for themselves in their old age. It is a matter for individuals whether or not to use these schemes, but I would advise against them. Just because you are experiencing financial strife for the first time in a long life does not mean you should start making bad decisions at the same time.
