Around one in five over 55s retiring this year will owe an average £38,200 in debts, according to financial firm Prudential.

This year’s retirees face increasing debt problems as the figures are 15% up on the average debts of £33,100 for their counterparts 12 months ago.

Mortgages and credit card bills make up most of the debt that are costing 3260 to service each month – around 19% of their average £1,290 monthly income.

On average, over 55s will take around four years to clear their debts, while 8% reckon they will never be able to afford to repay the cash they owe.

A quarter (25%) reckon they will spend £500 on debt payments.

Men retiring this year are likely to have more debt than women – an average £45,300 compared to £29,400.

Vince Smith-Hughes, Prudential’s retirement income expert, said: “With a manageable repayment programme in place, debts need not become an issue for this year’s retirees – and there is plenty of help available through free charities.

“Retiring with outstanding debts could be a sign of a lack of financial planning. It is important for those still working to save as much as possible as early as possible, and to consult a financial adviser to help them plan for a comfortable retirement.”

The research also shows that over 55s in Wales planning to retire this year are more likely to have debts (21%) compared with those in the East Midlands, who are the least likely (11%).

Meanwhile, a financial report from another financial firm, Aviva, claims family unsecured debt has increased by 48% in the past 12 months to just under £8,000 per household.

At the same time, typical monthly net income for families has risen by just 7% to £2,066, from£1,937 12 months ago.

Aviva claims this shows families are carrying and increasing their debts rather than paying them down.

Recent figures from the Office for National Statistics (ONS) suggests that the poorest pay more VAT in proportion to their income than the rest of the country.

The research also shows that the poorest households in the UK are now spending more of their income on goods which carry a VAT charge than they did in 1986.

The research carried out by the ONS in the 2009 to 2010 tax year broke down the UK population into 5 groups.

The poorest 20% of the population was found to spend approximately 9.8% of their disposable income on VAT. This figure was down from the figure of 10.7% in the 2008 to 2009 tax year and the 12.1% from 2007/2008.

However, the proportion of disposable income spent on VAT was then shown to gradually drop as people were split into wealthier groups.

The second poorest group spent 7.4% of their disposable income on VAT, this fell to 6.9% of disposable income for the middle group, 6.3% for the second richest group and the richest group were shown to only spend 5.3% of their disposable income on VAT.

It has been argued that VAT is a progressive tax and does not impact on poorer households more, because it is only applied to non-essential household items such as alcohol. However, the ONS research suggests that VAT is in fact a regressive tax.

This argument was recently used to justify an increase in VAT in the Chancellors emergency budget in 2010. From January 2011. From January 2011, VAT was increased from 17.5% to 20%.

David Breger, from the chartered accountants HW Fischer & Company, has suggested that the government needs to reconsider the full effects that VAT changes have on UK households.

Mr Breger said: “This latest piece of research reinforces what is widely perceived to be the fundamental inequality at the heart of VAT: the poorer pay more of it relative to their incomes than the wealthy.”

Losing a loved one is the greatest retirement fear for most people rather than worries about money, according to new research.

A third of over 55s who have retired have greater concerns about losing a partner, loved one or friend – while the rising cost of living (20 per cent) and returns on savings (11 per cent) lagged well behind.

Far from being worried about any precarious financial position, most retirement savers are more concerned about loneliness and a lack of companionship from a likeminded individual in their later years, according to the study by pension provider Standard Life.

But despite the compassionate reasons surrounding the loss of a life partner, many couple’s fail to look after their wills and estates to make sure their money passes to those who should benefit the most.

Rules about passing on wealth are complicated – and they are different for married and unmarried couples. Just under half (48 per cent) of couples have a will, according to the pension provider.

Julie Curtis, of Standard Life, said: “Regardless of an individual’s age losing a loved one can have a serious financial impact, but this problem is accentuated in retirement. While married and civil partner couples benefit from the spousal inheritance tax exemption and the transferable nil rate band, cohabiting couples or close friends don’t.

“The complications of dying without a will can be devastating on others and this is made even worse when going through the heartache of personal loss. Seeking the right advice when creating a will ensures loved ones will be financially secure and that their wealth is passed on correctly. The cost of creating one will be far less than any legal fees your family, partner or friends will incur in trying to reclaim the estate.”

The research also showed that nearly half (47 per cent) of the UK want to leave an inheritance to their children, with one in 10 (11 per cent) directing it to their grandchildren.

“It’s understandable that parents and grandparents want to pass their wealth on to the next generations and they should ensure they have a Will in place, which reflects this. Dying without one can create a complicated and costly process, possibly causing family rifts and further grief for those left behind,” said Ms Curtis.

Inflation, falling share prices and low interest rates are costing the over-55s around an extra £1,000 a year compared with the rest of the population, reveals a new survey.
The impact of rising living costs since 2008 varies depending on age – with the over 75s suffering least by paying out an average extra £671 a year, while those aged 65 to 69 years have to find an extra £1,130 a year.

Charity AgeUK says one of the major factors is low interest rates that have cut mortgage costs – but fewer over55s benefit because most have repaid their debt.

On the other hand, interest rates mean the rate of return on savings and investments is lower.

Gordon Morris, managing director, Age UK Enterprises said: “The fact remains that since 2008, people in later life have consistently experienced price rises at a far higher rate than the headline retail prices index (RPI). At an age when significant long-term financial decisions are being made, the RPI is crucial to helping people better plan for their future costs.”

Surprisingly, the inflation trend over the past three months for the over 55s highlights those in later life are not as financially insecure as many surveys predict.

AgeUk says the over 55s have experienced inflation at 0.27% below RPI since March 2011, which suggests they are £53.22 a year better off since the start of May – but this gain hardly dents the three-year trend that shows everyone over 55 has to find around an extra £984 to tread water with their income or cut spending.

“It is of course welcome news that RPI for March to June 2011 shows a lessening of the gap between inflation and cost rises experienced by those over 55,” said Morris. “But it is still important to help those in later life become ‘smarter’ consumers, particularly when it comes to financial products and services.”