Debt and problem debt among older people 4june13 - presentation
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Transcript of 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 FassamHead of Public Affairs
Prudential
This event is kindly supported by Age UK
#debtolderpeople
Welcome and Introductions
Baroness Sally GreengrossChief Executive
ILC-UK
This event is kindly supported by Age UK
#debtolderpeople
Dr Dylan KnealeHead of Research
ILC-UK
This event is kindly supported by Age UK
#debtolderpeople
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Tales of the Tallyman:Debt and problem debt among older peopleInternational 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.
“If I owe you a pound, I have a problem; but if I owe you a
million, the problem is yours.”
John Maynard
Keynes
Debt in the news
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Some debt statistics in numbers
£5,914
£7,982 £8,495
£9,016 £9,600
£8,956 £8,765 £7,776
Average Household
debt
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
0
10000
20000
30000
40000
50000
60000
70000
Proportion of bal-ances incurring in-terest
Number of accountsCredit card
trends
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
• 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
spanning 50+ years!
Why look at older people and debt?
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
- 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 do we already know about older people and debt?
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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?
What is the picture for older people?
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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
Data and Methods
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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
When does manageable debt become problem debt?
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Older age a strong predictor of expressing ‘credit negative’ attitudes
16-24 25-34 35-44 45-54 55-64 65-74 75+0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
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)
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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
Results: Attitudes to debt (II)
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
How would you pay for an unexpected £200 expense?
Different interpretations
Few would pay an unexpected £200 expense using credit
Pay by other means ; 85%
Can't pay ; 12%
Use credit; 3%
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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
Results: Unexpected £200 expense (ii)
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Levels of unsecured debt dropped 2002-2010
55-59 60-64 65-69 70-74 75-79 80-84 85-89 90+%0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Unsecured debt 2002
Secured debt only 2002
Unsecured debt 2010
Secured debt only 2010
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Most forms of debt reduced – one exception
Ow
e o
n c
red
...
Ow
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ir..
.
Pe
rso
na
l ...
Ove
rdra
ft
Ca
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..
Mo
ne
y L
e..
.
Ow
e t
o f
rie
...
Ha
ve a
mo
...
Of
mo
rtg
ag
e..
.
Un
secu
red
d..
.
An
y fo
rm o
f...
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
20022010
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
….including Credit & Store cards
2002 2004 2006 2008 20100.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%55-59 60-64 65-69 70-74 75-7980-84 85-89 90+
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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.
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
55-64 65-74 75-84£0
£1,000
£2,000
£3,000
£4,000
2002 2010
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
What does this mean for levels of problem debt?
Levels of overall problem debt stayed relatively
constant at all points 2002-2010 – Around one-in-
twenty
Restricting focus to debtors – proportion of
debtors in problem debt rose from 23% (2002) to
28% (2010)
Which forms of problem debt?2010
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%
70-79 1.1% 1.0% 0.9% 2.1%
80+ 0.2% 0.2% 0.1% 0.5%
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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.
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.
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.
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.
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 repayments.
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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 and caveat outlined in full in report
The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
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
Recommendations: Further research!...and
Dr Stella Creasy MPLabour and Co-operative Member of Parliament
for Walthamstow and Shadow Ministerfor crime prevention
This event is kindly supported by Age UK
#debtolderpeople
Brian CalvertFinancial Advocate
Age UK Croydon
This event is kindly supported by Age UK
#debtolderpeople
Brian CalvertAge 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 WestStrategy Adviser - Income and Poverty
Age UK
This event is kindly supported by Age UK
#debtolderpeople
Debt and problem debt among older people
Tuesday 4th June 2013
This event is kindly supported by Age UK
#debtolderpeople