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Analysis of the Wealth and Assets survey as part of the ILC-UK and PFRC collaboration programme on financial wellbeing in older age.

This new research by Andrea Finney of PFRC at the University of Bristol reveals the persistence of debt in old age as the “squeezed middle age” struggle with the both costs of essentials and childcare costs.

‘Demystifying non-mortgage borrowing in older age: a longitudinal approach’, is published by PFRC and the International Longevity Centre–UK (ILC-UK) as part of the Secondary Data Analysis Initiative funded by the Economic and Social Research Council.

The research analyses the Wealth and Assets Survey, finding that:

Ageing effects overpower cohort effects in explaining patterns of borrowing

  • One in four people aged 50 and over have outstanding non-mortgage borrowing, each owing an average of £4,500.
  • The oldest-old are much less likely to have outstanding borrowing than their younger counterparts. The research finds that this is principally the effect of ageing, rather than the cohort someone was born into, although cohort effects may play a greater role as people approach their 50s.

Double-edged pressures on the ‘squeezed middle age’

  • Having high fixed household costs, for example from rent or mortgage payments or having dependent children in the household, is a key factor in driving older people’s credit use. Low incomes and drops in income compound this further.
  • This underlines the particular pressures on in-work older people – who may also have children to provide for – not least with pay rises continuing to be outstripped by inflation and the continued decline in traditional (defined benefit) pensions.

‘Too much month at the end of the money’ contributes to older people’s credit use

  • Older people who struggle to make their incomes last until the end of the week or month are consistently more likely to have outstanding borrowing, and to owe more, than their counterparts who routinely have money left over.

Borrowing begets borrowing, even in older age

  • With fewer than one in five older people transitioning into or out of borrowing over a two-year period, the dominant picture is one of persistence in credit use.
  • Existing credit users – including those in their late 60s and early 70s – were more likely to become bigger borrowers (owing more after two years) than non-credit users were to become borrowers.

The effects of the financial crisis yet to impact older borrowers

  • There is no evidence that the constriction in credit supply which followed the financial crash of 2008 significantly impacted older people’s actual levels of borrowing.

Other reports from the PFRC and ILC-UK partnership include: The mortgage debt of older households and the effect of age, Understanding the oldest old or you can read more information on the PFRC website.

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