Debt and problem debt among older people 4june13 - presentation

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


#debtolderpeople

Welcome and Introductions
Baroness Sally Greengross
Chief Executive
ILC-UK


#debtolderpeople

Dr Dylan Kneale
Head of Research
ILC-UK


#debtolderpeople

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.

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


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%


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

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
- Concern that picture since recession worsening – e.g Stepchange

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
people?

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

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

• Some or severe financial difficulties

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+

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


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%


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

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


90+%

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


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

….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


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

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


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+

0.2%
0.2%
0.1%

2.1%
0.5%

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


For many, transition to problem debt was rapid:


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


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


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.

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


 Limitation to addressing issues of longevity, ageing and population change.
dedicated and caveat outlined in full in report

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

Dr Stella Creasy MP
Labour and Co-operative Member of Parliament
for Walthamstow and Shadow Minister
for crime prevention


#debtolderpeople

Brian Calvert
Financial Advocate
Age UK Croydon


#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


#debtolderpeople

Debt and problem debt among older people 4june13 - presentation

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