Avoid debt with pension transfer?

Almost one in five (18 per cent) Brits who intend to retire this year will do so with debts repayments left incomplete, new research reveals.

One way in which the difficulties associated with this could be negated is by seeking pension transfer advice in order to maximise income in later life and reduce the impact debt will have on personal finances.

The study - conducted by Prudential - revealed the average monthly repayments people in this position will be required to make is £260.

It was noted this equates to approximately one-fifth (19 per cent) of the expected monthly income of £1,290.

However, the number of people coming to the end of their working life in debt has fallen on the equivalent figure recorded in 2011, which stood at 20 per cent.

Despite this, the average amount of money owed has increased from £33,100 per person last year to £33,820 per person in 2012.

Men were found to be more likely to face these difficulties than women, as males can expect to retire £45,300 in debt.

The equivalent average figure for females stands at £29,400 and 16 per cent of this demographic are in this position, compared with 20 per cent of males.

"Retiring with outstanding debts could be a sign of a lack of financial planning. It is important therefore for those still at work to save as much as possible as early as possible and to consult a financial adviser to help them plan for a comfortable retirement," commented pensions expert for Prudential Vince Smith-Hughes.

"With a manageable repayment programme in place, debts need not become an issue for this year's retirees," he added.

This advice may be particularly relevant in the current economic climate, as the Consumer Credit Counselling Service recently warned owing money can lead to financial difficulties in later life.

Ashall Glover Financial Services, pension transfer specialists

Posted by Charles Powell