A new problem for the old
Even before the recession, it was
widely accepted that Britain was heading for a debt crisis – a
personal one, regardless of what happened to the rest of the world
economy. For the previous decade, individuals had been offered access
to credit on an entirely unprecedented (and, as many argued at the
time, entirely irresponsible) level. Britain built up around half of
Europe's personal debt, and it was only a matter of time before the
whirlwind would have to be reaped.
Then the economy tanked and the housing bubble burst. Personal insolvencies hit their highest level for 20 years in 2009. Figures for 2010 are comparable, and the problem remains a serious one – with an austere year to look forward to, there is very little optimism that the picture will improve significantly in 2011.
The situation is disproportionately effecting a new demographic: the elderly. Although they make up only a relatively low proportion of the total number of personal insolvencies, levels among the over-65s are growing 50% faster than for any other group.
'There's a real worry over highly geared elderly people retiring with debts they're unable to service,' says Matthew Chadwick, a Business Recovery Partner at BDO. 'Previously this was rare. However, the current generation of retirees is the first to have been comfortable with using credit, unlike their credit-shy predecessors – we're now seeing the effects of this beginning to flow through the system, and more elderly people are likely to struggle over the next few years.'
Some key factors are behind the rising numbers. 'People are leaving it later and later to have children,' Chadwick points out. 'These children then leave home later because they can't afford to buy houses, so they need to be supported for longer. If you have children when you're 30, it's more than likely you'll still be supporting them when you're 55.'
Other increasing expenses – rising fuel prices and so on – are compounding the problem. And for many of the elderly there is less money available to service the debts they've incurred, and opportunities for increasing income are very limited. With the battering pensions and other annuities have taken thanks to the stock market's recent troubles; something has to give.
'If you have to choose between paying your gas bill and your credit card bill, then you'll choose the gas,' comments Chadwick. 'But of course the debt doesn't go away, and insolvency becomes an inevitability in some cases.' Underlining this fact, research from Age UK shows that some 40% of people aged over 60 are concerned at being able to afford their heating bills.
With no immediate prospect of a significant reduction in the numbers affected, the importance of education is writ large. While some 1.4 million people accessed free debt advice services in 2010, it's the numbers who don't which are really causing concern: the Money Advice Trust has carried out research showing that of 5 million people reporting difficulties servicing debts, only one in six of them had sought any advice.
How these people – the elderly in particular – will cope with their situations, is a matter of real concern for the nation.
