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


#debtolderpeople

Welcome and Introductions

Baroness Sally GreengrossChief Executive

ILC-UK


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Dr Dylan KnealeHead of Research

ILC-UK


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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



“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



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



• 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?



- 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?



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?



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



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?



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)



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)



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%



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)



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



Most forms of debt reduced – one exception

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0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

20022010



….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+



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

55-64 65-74 75-84£0

£1,000

£2,000

£3,000

£4,000

2002 2010



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 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 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 and caveat outlined in full in report



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


#debtolderpeople

Brian CalvertFinancial Advocate

Age UK Croydon


#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


#debtolderpeople

Debt and problem debt among older people

Tuesday 4th June 2013


#debtolderpeople

Economy & Finance

Debt and problem debt among older people 4june13 - presentation