The introduction of a flat rate state pension of £144 a week from 2016 sounds like good news for older people, given that it’s a significant increase from the current basic of closer to £100. So does a new cap of £72,000 on the amount they have to contribute to social care.
But behind the Queen’s Speech headlines from last week, many of these baby boomers are in danger of going bust, as their income fails to keep pace with their lifestyle, according to the money advice charity Step Change .
The number of pensioners coming to them for advice because they are in deep financial trouble has risen 40 per cent in the last three years. To make matters worse, over-60s have larger debts than any other age group, owing an average £23,000 in unsecured debts, such as overdrafts, personal and payday loans.
Debtors in this age group who contacted the charity have a particular problem with credit card debt and typically owed £15,000 – £5,000 more than the average for other age groups.
So learning how to manage credit is key to a comfortable retirement – or a comfortable old age, given that figures from the Office for National Statistics show that more than 300,000 people aged over 70 still have a job.
Here are five simple steps that could help.
1. Get a reality check
Your credit report, which lists all your credit accounts and repayment history, will remind you what you really owe and show if you’ve slipped behind with repayments. You can see your Experian credit report and credit score with a 30-day trial of CreditExpert .
2. Set the record straight
Even minor clerical errors in your credit report, such as different ways of recording your address, could affect your credit score – the number lenders calculate to measure the chances that you’ll repay what you owe. If you disagree with anything, contact the lender who supplied the information and ask for a correction.
3. Build your credit status
Register to vote at your current address, close unused accounts, only apply for credit when you really need to and can afford it and, above all, make your repayments on time, every time.
If you have little or no experience of credit, why not start with a credit card that you use for everyday spending and repay in full every month. It could help you build a track record that shows you are a reliable borrower – and reliable borrowers are more likely to get better deals.
4. Get the right deals for you
Do your research carefully – use internet and newspaper personal finance guides, then check comparison websites to see what you might qualify for. Deals designed for people in your circumstances should suit you best, so be honest about your situation, with yourself as well as potential lenders.
5. Keep affordability in mind
Never take out credit to make repayments on your existing accounts. Instead, talk to your lenders and explain your circumstances – they may be able to reschedule payments or give you a repayment holiday. Free money advice is widely available – as well as Step Change (www.stepchange.org), you could try Citizens Advice (www.citizensadvice.org.uk) or National Debtline (www.nationaldebtline.co.uk).