With more time being spent at home since the start of the Covid-19 pandemic, many have used this as an opportunity to sort their finances.
And for some, this will have involved repaying existing debt. Indeed, the Bank of England reported an average repayment of £3.9 billion of consumer debt per month between March and June this year, marking the first time repayments have outweighed additional borrowing in at least five years.
Perhaps a sign that many consumers have been keen to future-proof their finances against any economic downturn by avoiding new borrowing and paying off existing obligations.
This includes Britain’s older population. more2life’s 2020 Later Life Lending research found the UK’s over-55s are expected to borrow £19 billion less over the next two years as a result of the Covid-19 crisis, with many older people now more cautious about purchasing big-ticket items, such as cars and holidays.
However, while many have cut down on spending and borrowing in the short term, it is expected as people’s appetite for borrowing returns, we will see debt increase in the longer term.
For example, more2life found overall debt among this demographic is set to increase from £207 billion in 2021 to reach £300 billion by 2030.
While this increase in debt may seem stark, borrowing in later life, especially against assets such as property, can help boost retirement income and ensure retirees can meet essential costs and live comfortably.
However, our research has uncovered that men and women in later life approach borrowing quite differently.
Differences in borrowing habits between men and women
Interestingly, a third (33%) of women aged 54 and over have borrowed in the last five years to cover essential day-to-day expenses, compared to only a quarter (26%) of men – potentially due to their need to fund a longer retirement from a smaller average income.
Furthermore, more men (30%) than women (23%) have borrowed in the past five years to fund a large purchase, such as a holiday or a car, suggesting that women are more cautious in their approach to borrowing.
However, on the whole, women are less likely to borrow. According to more2life’s survey, almost two in three (61%) women aged 54 and over claim nothing has or would encourage them to take out debt. This is compared to just 55% of men of the same age.
Women are also often more concerned about the stresses that debt repayments can create, with a quarter (25%) aged 54 and over citing this as a factor which would most discourage them from borrowing.
Why creating a holistic financial plan matters
While there is more focus than ever on saving for retirement, the difficult truth is that many over-55s at the moment need to fund a longer retirement than their parents, but with smaller less secure pensions.
Women – who also face the gender pensions gap – are arguably harder hit than their male counterparts which makes it particularly important that they develop a holistic retirement plan which includes considering the role that property can play.
However, given the different approaches to borrowing apparent between the genders, it is entirely possible that many women who could benefit from later life lending products like equity release or retirement interest-only mortgages are not considering these as part of a wider financial plan.
This is why seeking the right advice is crucial as the adviser will not only be able to provide support as people make their choices around retirement but also challenge any misconceptions they may have.
Indeed, by speaking with a professional, those with concerns around borrowing in retirement will be more confident and knowledgeable on their options and how products like a lifetime mortgage could sit alongside other assets to help them generate income.
Ultimately, this will ensure that women – as well as men – are in a stronger position to consider the full range of financial tools available to them as they plan their later life.
The combination of the gender pay gap and the subsequent retirement income gap, as well as attitudes to debt, can place women at a significant financial disadvantage. However, with the support of advisers, more women will be encouraged to consider all their assets as they plan for retirement.
Stuart Wilson is chief marketing director, more2life
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