Helping clients avoid debt into retirement

As 1 in 5 UK employees aged 55 plus approach retirement with debt, advisers can pinpoint three ways to decrease anxiety and increase money confidence.

"The cost of debt is now centre stage, and millions may be having to rethink their retirement plans." Alistair McQueen, Head of Savings & Retirement, Aviva

Sometimes it’s with hands over our eyes, squinting through the slats between our fingers, that we peek at our credit card bill. Other times, staring at the envelope without touching it, we reckon it can probably disappear or at least burst into flames.

According to our latest research, almost 3 in 4 (74%) UK workers aged 16 and over admit to having debt that’s weighing them down. [1] And just over 2.5 million UK employees (aged 16 and over), “haven’t got a clue” how much they owe in outstanding debt.[1]

Although nearly 2 out of 5 (39%) employees over the age of 55 have no debt, 36% have credit or store card debt and 20% have mortgage debt in the final decade before retirement. [1] And while it’s not out of the ordinary for people to go into retirement with some debt (think credit cards, mortgages or car loans), it can have a significant affect on later life plans because it can lead to more stress and less income in retirement.

With almost 9 out of 10 (86%) employers, surveyed in our latest Working Lives report, feeling responsible for making sure their employees save for a comfortable retirement, recognising employees’ growing worries over debt may help them transition into their retirement years.[2]

Let’s peek behind the debt together

It seems, from our Working Lives report, that employees closest to retirement age are less likely to know if they’ll be able to retire comfortably. [2] This suggests that those closest to retirement may be more anxious or overwhelmed about the decisions they’ll soon need to make.

Getting closer to retirement, some over 55 employees may begin to realise they either haven’t saved enough or haven’t chipped away at their debt. Over half (52%) of employees aged 55 and older, in our recent survey, haven’t made any plans for later life like pension provision, long term care, private medical care, home maintenance or funeral expenses.[1]

“Interest rates have risen to levels we haven’t seen since 2008 – and are expected to rise further,” says Alistair McQueen, Head of Savings and Retirement at Aviva. “The cost of debt is now centre stage, and millions may be having to rethink their retirement plans.”

In trying to get out of debt, 44% of employees aged 55 plus cut back on non-essential monthly spending (like luxury goods, holidays, and entertainment) while 37% cut back on spending for food and drink.[1]

Showing some promise, over half (51%) of employees in their mid-50s and older believe that they’re highly likely to be completely debt-free by the time they retire and only 8% believe they’ll likely carry large debts into retirement.[1]

Point the way – sometimes, it’s hard to peek past the fear or anxiety of debt to see that you could be there to help them confront their debt. Making sure that your services are regularly highlighted, either through social media, newsletters, or emails, may encourage clients to take advantage of what’s available.

Put the pointer (finger) away – for some, having debt can churn up complicated feelings. From anxiety and stress to feeling embarrassed or ashamed, debt can bring all the icks out. And one way to help remove some of those unpleasant feelings is to make the topic of debt more common, comfortable and without blame.

This may include holding local workshops or seminars quarterly and encouraging your community to attend for ideas and resources on how to handle debt.

It may also look like having online support networks that are accessible 24/7 online and provide anonymity for those who prefer discretion. Recognising that debt, and all the feelings that may come with it, affects lots of different people can help take the loneliness away.

Point to the future, plan now – “Starting to think and plan further ahead  as early as possible,” says Alistair McQueen, “is a small step that can make a big difference in the long-term. Individuals can take some positive actions to reduce their debt before entering retirement, such as consolidating their debt, paying off high-interest loans or switching to a cheaper rate, alongside reducing unnecessary expenses or taking out a debt management plan.”

Encouraging new and existing clients with financial education and tailored sessions may be a powerful way to support them in their steps towards becoming debt free.

Aviva. Employees and debt survey (CW10959MPb). Censuswide. 24 April 2023.

Aviva. Working Lives Report 2023: Fit for Future. Censuswide, 5 May 2023.