Debt and problem debt among
older people

Tuesday 4th June 2013
This event is kindly supported by Age UK

#debtolderpeople
Welcome
Tim Fassam
Head of Public Affairs
Prudential

This event is kindly supported by Age UK

#debtolderpeople
Welcome and Introductions
Baroness Sally Greengross
Chief Executive
ILC-UK

This event is kindly supported by Age UK

#deb...
Dr Dylan Kneale
Head of Research
ILC-UK

This event is kindly supported by Age UK

#debtolderpeople
Tales of the Tallyman:
Debt and problem debt
among older people
International Longevity
Centre-UK
The International Longev...
Debt in the news
“If I owe you a pound, I have a problem; but if I owe you a
million, the problem is yours.”
John Maynard
...
Some debt statistics in numbers
£9,600
£9,016
£8,956
£8,765
£8,495
£7,982
£7,776
£5,914

Average
Household debt
90.0%

700...
Why look at older people and debt?
• Researchers always say that there is a dearth of studies etc – this
time there really...
What do we already know about older people and
debt?
- Older people less likely than younger people to have unsecured debt...
What is the picture for older people?
1. Do older people have different attitudes to younger people
to credit and borrowin...
Data and Methods
Data:
- Levels of debt and problem debt: English Longitudinal Study of
Ageing (ELSA) (2002-2010) – Study ...
When does manageable debt become problem
debt?
Defining problem debt (over-indebtedness):
 No consensus in literature but...
Older age a strong predictor of expressing ‘credit
negative’ attitudes
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%

40.0%
30.0%
2...
Results: Attitudes to debt (II)
 Age effect is not explained by the different observable
characteristics of older people ...
Few would pay an unexpected £200 expense
using credit
 How would you pay for an unexpected £200 expense?
 Different inte...
Results: Unexpected £200 expense (ii)
 More likely to turn to credit than not pay:
– Married people
– People with higher ...
Levels of unsecured debt dropped 2002-2010
50.0%
45.0%
40.0%

Unsecured debt 2002

35.0%
Secured debt only 2002
30.0%
Unse...
Most forms of debt reduced – one exception
50.0%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%

2002

The Inte...
….including Credit & Store cards
55-59
75-79

30.0%

60-64
80-84

65-69
85-89

70-74
90+

25.0%
20.0%
15.0%

10.0%
5.0%
0....
Changes in debt
 So not much of a ‘tale’ about the tallyman? – or at
least a fading story?
 No….Amount of debt continued...
Fewer people owe much more
 Among debtors:
– Average amount 2002: £4,050; 2010: £6,200
– Median amount 2002: £1,500; 2010...
What does this mean for levels of problem debt?
 Levels of overall problem debt stayed relatively
constant at all points ...
The characteristics are associated with problem
debt are:
 Age (being 50-64 vs 65+)
 Employment Status (self-employed, u...
For many, transition to problem debt was rapid:

The International Longevity Centre-UK is an independent, non-partisan thi...
Factors associated with increased likelihood of
transitioning into problem debt include:
– Becoming self-employed
– Becomi...
Transitioning into problem debt (2002-2010)
appears to:
– Significantly decrease quality of life (CASP)
– Raise the likeli...
Outcomes – case study – further research and
qualitative research needed
A pensioner with memory loss had been persuaded t...
Conclusions
 Results pose concerns for the following reasons:

1. Value of unsecured debts help
2. Speed of transition to...
Recommendations: Further research!...and
1. Protect funding for debt advice services and particularly target
funding
2. Ne...
Dr Stella Creasy MP
Labour and Co-operative Member of Parliament
for Walthamstow and Shadow Minister
for crime prevention
...
Brian Calvert
Financial Advocate
Age UK Croydon

This event is kindly supported by Age UK

#debtolderpeople
Brian Calvert
Age UK Croydon
Financial Advocate
Croydon
• Diverse borough

• Gaps between rich and poor
• Areas of deprivation
• Life expectancy
Impact of debt on older people
• Mental health

• Physical health
Debt and borrowing
• Secured/unsecured debts

• Owner occupiers
• Borrowing
Fear
• Power

• Aggression
• Threats
Seeking solutions
• Consolidation loans

• Lower monthly instalments
• Increase in interest paid
Shame
• Embarrassment and stigma

• Sense of being overwhelmed
• Too proud to ask for help
• What should they pay?
Scams
• Targeted crime

• Groomed
• Loss
SUMMARY
• Is there a typical person in debt?

• Future impacts on older people
• Prevention
Panel Debate and Q&A
Panellist

Sally West
Strategy Adviser - Income and Poverty
Age UK

This event is kindly supported by...
Debt and problem debt among
older people

Tuesday 4th June 2013
This event is kindly supported by Age UK

#debtolderpeople
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Debt and problem debt among older people 4june13 - presentation

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Debt is commonly assumed to be a problem of the young and not of the old. New research carried out by ILC-UK and supported by Age UK examines the validity of this assumption and sets out the extent to which debt impacts on the lives of older people.

Over recent years, older people, in common with other age groups, have faced significant financial challenges. For older people, lower than expected returns on savings and decreases in annuity rates have reduced the income many retirees were expecting in later life. Increases in energy and food costs are also hitting older people on fixed incomes hard, while older workers are faced with unprecedented job and income insecurity. Could these new challenges have influenced the attitudes and behaviours of older people towards credit usage? And just how accurate are cosy depictions of older people as ‘squirreling savers shunning credit’ compared to the reality?

This new research explores the way in which attitudes towards borrowing vary by age before presenting new findings on levels of problem debt among older people. The characteristics associated with entering problem debt are explored in this research, as well as the outcomes of living with problem debt on the lives of older people.

Dr Dylan Kneale, Head of Research at ILC-UK, presented the findings of the research. Dr Stella Creasy MP, known for her parliamentary work around the field of debt, was a keynote speaker, while Sally West, Income and Poverty Strategy Adviser at Age UK, provided insight into the organisation’s work in providing debt counselling and advice for older people. Tom Wright, Chief Executive of Age UK, and Baroness Sally Greengross, Chief executive of ILC-UK, co-chaired the event and all took part in a panel debate after presentations.

Published in: Economy & Finance, Business
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Debt and problem debt among older people 4june13 - presentation

  1. 1. Debt and problem debt among older people Tuesday 4th June 2013 This event is kindly supported by Age UK #debtolderpeople
  2. 2. Welcome Tim Fassam Head of Public Affairs Prudential This event is kindly supported by Age UK #debtolderpeople
  3. 3. Welcome and Introductions Baroness Sally Greengross Chief Executive ILC-UK This event is kindly supported by Age UK #debtolderpeople
  4. 4. Dr Dylan Kneale Head of Research ILC-UK This event is kindly supported by Age UK #debtolderpeople
  5. 5. Tales of the Tallyman: Debt and problem debt among older people International Longevity Centre-UK The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  6. 6. Debt in the news “If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.” John Maynard Keynes The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  7. 7. Some debt statistics in numbers £9,600 £9,016 £8,956 £8,765 £8,495 £7,982 £7,776 £5,914 Average Household debt 90.0% 70000 80.0% 60000 70.0% 50000 60.0% 40000 50.0% 40.0% 30.0% Credit card trends Proportion of balances incurring interest Number of accounts 30000 20000 20.0% 10000 10.0% 0 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 0.0% The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  8. 8. Why look at older people and debt? • Researchers always say that there is a dearth of studies etc – this time there really is! (beyond a handful of key studies) • Opportune moment in the wake of the financial crisis – did older people exhibit similar trends in debt acquisition to younger people? • Baby boomers and debt…..problem debt? Further challenges of existing evidence base: - Many studies only compare patterns of debt of older people alongside younger people – lower levels – what about among older people?; US focus older - Typical age breakdown: 18-24, 25-39, 40-54, 55+; An age group The International Longevity spanning 50+ years! Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  9. 9. What do we already know about older people and debt? - Older people less likely than younger people to have unsecured debt - Conventional wisdom overlooks debt as problematic among older people - Why? Are these changing? - (i) generational scepticism towards and inexperience of debt; - (ii) fixed income – less shock? (iii) age restrictions? - (iv) psychological factors (e.g. self-control) and consumption patterns - (v) stigma (vi) life course compatibility - Evidence of different profile of manageable vs problem debt - Problem debt – many characteristics of financial hardship; - Outcomes – older people specific? – mental heath The International Longevity Centre-UK is an independent, non-partisan think-tank - Concern that picture since recession worsening – e.g Stepchange dedicated to addressing issues of longevity, ageing and population change.
  10. 10. What is the picture for older people? 1. Do older people have different attitudes to younger people to credit and borrowing? 2. How do older people accumulate debts? 3. How many older people fail to keep their debts to a manageable level and fall into problem debt? 4. Who is most likely to fall into problem debt among the older population? 5. What are the impacts of living in problem debt on older The International Longevity Centre-UK is an independent, non-partisan think-tank people? dedicated to addressing issues of longevity, ageing and population change.
  11. 11. Data and Methods Data: - Levels of debt and problem debt: English Longitudinal Study of Ageing (ELSA) (2002-2010) – Study of older people aged 50+ in England - Attitudes to credit and borrowing: British Social Attitudes Survey (BSA 2007 and 2009) – Study of attitudes in GB - Usage of credit in the event of unexpected event: Family Resources Survey (2010-11) – UK wide study Methods: Cross-sectional and longitudinal independent, non-partisan think-tank The International Longevity Centre-UK is an dedicated to addressing issues of longevity, ageing and population change.
  12. 12. When does manageable debt become problem debt? Defining problem debt (over-indebtedness):  No consensus in literature but many good examples  Used data on unsecured debt only to define problem debt  This study used 3 indicators: – Excessive repayment: income ratio • Income and thresholds – High value of debt (£10k + inflation) • Money management? – Unsecured debt and self-reported financial circumstances The International Longevity Centre-UK is an independent, non-partisan think-tank • Some or severe financial difficulties dedicated to addressing issues of longevity, ageing and population change.
  13. 13. Older age a strong predictor of expressing ‘credit negative’ attitudes 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% Credit makes it easier to plan finances (Disagree/Strongly) Should be made harder to borrow money (Agree/Strongly) Credit encourages people to spend more than they can afford (Agree/Strongly) 0.0% The International Longevity Centre-UK is an45-54 independent, non-partisan think-tank 16-24 25-34 35-44 55-64 65-74 75+ dedicated to addressing issues of longevity, ageing and population change.
  14. 14. Results: Attitudes to debt (II)  Age effect is not explained by the different observable characteristics of older people compared to younger people.  Among older people (aged 55+), older people, women and those who are married/cohabiting have more negative attitudes to credit and borrowing.  Some evidence people with higher incomes may have more positive attitudes to credit and borrowing.  Little change (among 55+) between 2007 and 2009 The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  15. 15. Few would pay an unexpected £200 expense using credit  How would you pay for an unexpected £200 expense?  Different interpretations Use credit, 3% Can't pay , 12% Pay by other means , 85% The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  16. 16. Results: Unexpected £200 expense (ii)  More likely to turn to credit than not pay: – Married people – People with higher incomes  More likely not to pay than turn to credit: – Women – Ethnic Minority – Longstanding Illness – Living in rented housing – Unable to keep up with bills The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  17. 17. Levels of unsecured debt dropped 2002-2010 50.0% 45.0% 40.0% Unsecured debt 2002 35.0% Secured debt only 2002 30.0% Unsecured debt 2010 25.0% Secured debt only 2010 20.0% 15.0% 10.0% 5.0% 0.0% 55-59 60-64 65-69 70-74 75-79 80-84 85-89 The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change. 90+%
  18. 18. Most forms of debt reduced – one exception 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2002 The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change. Any form of debt Unsecured debt (excluding interest only) Of mortgage holders, interest only Have a mortgage Owe to friends/family Money Lender Catalogue/Mail Order Overdraft Personal Loan Owe on hire purchase Owe on credit or store card 2010
  19. 19. ….including Credit & Store cards 55-59 75-79 30.0% 60-64 80-84 65-69 85-89 70-74 90+ 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 2002 2004 2006 2008 2010 The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  20. 20. Changes in debt  So not much of a ‘tale’ about the tallyman? – or at least a fading story?  No….Amount of debt continued to rise  Overall average increase among 50+ population is modest from approximately £1,100 in 2002 to £1,400 in 2010  But fewer people owed more – debt became more concentrated among smaller numbers of older people The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  21. 21. Fewer people owe much more  Among debtors: – Average amount 2002: £4,050; 2010: £6,200 – Median amount 2002: £1,500; 2010: £2,500  This rise is spread across debtors of all ages £4,000 2002 £3,000 2010 £2,000 £1,000 £0 55-64 65-74 75-84 The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  22. 22. What does this mean for levels of problem debt?  Levels of overall problem debt stayed relatively constant at all points 2002-2010 – Around onein-twenty  Restricting focus to debtors – proportion of debtors in problem debt rose from 23% (2002) to 28% (2010) 2010  Which forms of problem debt? Excess ratio Subjective Over £10k Any 55-59 4.6% 5.6% 5.9% 12.6% 60-69 2.9% 1.9% 3.2% 6.0% Longevity Centre-UK is an independent, non-partisan think-tank 70-79 The International1.1% 1.0% 0.9% 80+ dedicated to addressing issues of longevity, ageing and population change. 0.2% 0.2% 0.1% 2.1% 0.5%
  23. 23. The characteristics are associated with problem debt are:  Age (being 50-64 vs 65+)  Employment Status (self-employed, unemployed)  Income (low income)  Housing tenure (owning with a mortgage, renting)  Depression (2010)  Manageable debt vs problem debt – Low income, Unemployment/Self Employment, Mortgage/Renting The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  24. 24. For many, transition to problem debt was rapid: The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  25. 25. Factors associated with increased likelihood of transitioning into problem debt include: – Becoming self-employed – Becoming unemployed – Reduced household income – Becoming depressed (65+) Not proof of causality – markers? Factors associated with decreased likelihood of transitioning into problem debt: – The passage of time/becoming older The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  26. 26. Transitioning into problem debt (2002-2010) appears to: – Significantly decrease quality of life (CASP) – Raise the likelihood of marital breakdown – Raise the risk of depression (65+)  Other outcomes?  Other outcomes not measured The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  27. 27. Outcomes – case study – further research and qualitative research needed A pensioner with memory loss had been persuaded to part with several thousand pounds in savings and taken out a bank loan for nearly £20,000, having been told by rogue traders that he needed house repairs. The ‘repairs’ caused major damage to his property and he had to bring in other workmen to rectify this. He sought help from Age UK as he was having great difficulty repaying the loan and the stress of the situation was having an impact on his health. The adviser helped him claim benefits and challenge the bank about whether the loan had been irresponsible. This challenge was not successful but the adviser was able to negotiate manageable Centre-UK is an independent, non-partisan think-tank The International Longevity repayments. dedicated to addressing issues of longevity, ageing and population change.
  28. 28. Conclusions  Results pose concerns for the following reasons: 1. Value of unsecured debts help 2. Speed of transition to problem debt 3. Distribution of problem debt 4. Outcomes of problem debt The International Longevity Centre-UK is an independent, non-partisan think-tank  Limitation to addressing issues of longevity, ageing and population change. dedicated and caveat outlined in full in report
  29. 29. Recommendations: Further research!...and 1. Protect funding for debt advice services and particularly target funding 2. Need for better information on older debtors (55+!) 3. Protect debtors from falling so rapidly into problem debt 4. Better advice for older people who are self employed 5. Improved support for older debtors with mental health issues 6. Further exploration of when manageable debt becomes problem debt 7. Appropriate access to safe credit The International Longevity Centre-UK is an independent, non-partisan think-tank dedicated to addressing issues of longevity, ageing and population change.
  30. 30. Dr Stella Creasy MP Labour and Co-operative Member of Parliament for Walthamstow and Shadow Minister for crime prevention This event is kindly supported by Age UK #debtolderpeople
  31. 31. Brian Calvert Financial Advocate Age UK Croydon This event is kindly supported by Age UK #debtolderpeople
  32. 32. Brian Calvert Age UK Croydon Financial Advocate
  33. 33. Croydon • Diverse borough • Gaps between rich and poor • Areas of deprivation • Life expectancy
  34. 34. Impact of debt on older people • Mental health • Physical health
  35. 35. Debt and borrowing • Secured/unsecured debts • Owner occupiers • Borrowing
  36. 36. Fear • Power • Aggression • Threats
  37. 37. Seeking solutions • Consolidation loans • Lower monthly instalments • Increase in interest paid
  38. 38. Shame • Embarrassment and stigma • Sense of being overwhelmed • Too proud to ask for help • What should they pay?
  39. 39. Scams • Targeted crime • Groomed • Loss
  40. 40. SUMMARY • Is there a typical person in debt? • Future impacts on older people • Prevention
  41. 41. Panel Debate and Q&A Panellist Sally West Strategy Adviser - Income and Poverty Age UK This event is kindly supported by Age UK #debtolderpeople
  42. 42. Debt and problem debt among older people Tuesday 4th June 2013 This event is kindly supported by Age UK #debtolderpeople
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