Retirement is supposed to be a time to relax and enjoy life after decades of work. But for many people in the UK, debt doesn’t retire when they do.
Whether it’s leftover mortgage payments, credit card balances, personal loans, or helping adult children financially, carrying debt into retirement is increasingly common.
Managing debt on a pension income can feel stressful, especially when the cost of living is rising and interest rates remain unpredictable.
But it’s not hopeless.
With some practical planning and clear decision-making, you can regain control of your finances and ease the burden of debt.
In this guide, we’ll break down realistic steps you can take to manage debt in later life, tailored to real-life circumstances.
Why debt is different in retirement
When you’re working, you can increase your income through overtime, career moves, or side jobs.
In retirement, most people rely on fixed income sources like the state pension, private pensions, or savings.
That means:
- Debt repayments take up a larger share of your income
- Unexpected costs like home repairs or medical needs can throw your budget off course
- Borrowing more to stay afloat can create a cycle of reliance
That’s why managing existing debt rather than adding to it is so important.
The goal isn’t perfection.
It’s making your money stretch further, protecting your peace of mind, and avoiding unmanageable repayments.
Step 1: Get a clear picture of debt and income
The first step is to write everything down. Many people underestimate how much they owe or forget smaller debts.
Make a simple list:
- Who you owe money to (credit cards, loans, catalogue accounts, overdrafts)
- How much you owe
- Monthly payments due
- Interest rates (if known)
At the same time, write down your income sources:
- State pension
- Workplace or personal pensions
- Pension Credit, Attendance Allowance, or other benefits
- Any part-time earnings or rental income
Seeing all of this on paper (or screen) helps you understand the gap between what’s coming in and what’s going out.
It’s the foundation of any realistic debt plan.
Step 2: Prioritise debts that carry the biggest consequences
Not all debts are equal. Some carry more serious consequences if left unpaid.
These are priority debts.
Start by identifying:
- Mortgage or rent arrears: Can put your home at risk
- Council tax: Can lead to court action or bailiffs
- Energy bills: May result in disconnection
- TV Licence, court fines, and maintenance payments
If you’re behind on any of these, deal with them first.
Contact the provider or council and ask about payment plans. They have a legal obligation to treat you fairly, especially if you’re on a pension or limited income.
Once priority debts are stabilised, you can turn to others, such as credit cards or personal loans.
Step 3: Rebuild your budget to reflect retirement realities
In retirement, your expenses and priorities often shift. Some costs go down (commuting, work clothes), but others go up (heating, healthcare, helping family).
Create a simple monthly budget that includes:
- Fixed essentials: Rent or mortgage, utilities, food, transport
- Minimum debt payments
- Variable costs: Entertainment, gifts, holidays, takeaways
- Occasional or annual costs: Insurance renewals, Christmas, MOT
Then look for gentle ways to reduce spending:
- Check if you’re eligible for discounted council tax or utility support
- Use a warm home discount, if available
- Review subscriptions, insurances, and mobile/broadband for cheaper options
Even trimming £20–£50 per month can help ease pressure. A budget doesn’t restrict your life, it helps you plan for it.
Step 4: Avoid relying on credit to cover essentials
It’s very common for retirees to use credit cards or overdrafts to fill short-term gaps.
But this often leads to bigger problems down the line—especially with high-interest debt.
If you find yourself borrowing to pay for:
- Food or utility bills
- Rent or council tax
- Family support
That’s a red flag that your income isn’t stretching far enough.
Before turning to more credit, check whether you’re entitled to extra income through benefits or local support schemes.
Many pensioners miss out on help they’re eligible for.
Useful tools:
You may qualify for:
- Pension Credit: Tops up low state pensions
- Housing Benefit or Council Tax reduction
- Attendance Allowance: If you need help due to illness or disability
- Warm Home Discount: To reduce energy bills
This isn’t charity, it’s support you’ve earned.
Step 5: Speak to your creditors—don’t ignore the problem
Many people feel ashamed or afraid to contact lenders but being open about your situation can lead to real support.
Under Financial Conduct Authority (FCA) rules, creditors must treat you fairly, especially if you’re vulnerable due to age, health, or financial hardship.
When contacting creditors:
- Explain your retirement income and expenses
- Ask for reduced payments, a freeze on interest, or a temporary payment break
- Request communication by post or email if phone calls feel overwhelming
Creditors often have hardship departments specifically for older customers.
You may also ask them to deal directly with a trusted family member, carer, or debt charity if you prefer.
Step 6: Explore debt solutions—safely and for free
If your debts are simply too large to manage, don’t struggle in silence.
There are legitimate debt solutions available and some are specifically suited to people on low or fixed incomes.
Before making any decisions, speak to a free, reputable debt advice organisation.
They’ll help you weigh your options and protect you from untrustworthy providers.
Trusted services include:
- StepChange (stepchange.org)
- Citizens Advice (citizensadvice.org.uk)
- National Debtline (nationaldebtline.org)
- Christians Against Poverty (capuk.org)
They can help with:
- Debt Management Plans (DMPs): An affordable monthly payment spread across your debts
- Debt Relief Orders (DROs): For people with low income and minimal assets
- Individual Voluntary Arrangements (IVAs): Legally binding repayment plans
- Bankruptcy: A last resort, but sometimes the cleanest way to reset
These options all have pros and cons so it’s essential to get tailored advice before proceeding.
Step 7: Protect your mental health and wellbeing
Debt doesn’t just affect your wallet—it affects your sleep, your relationships, and your peace of mind.
It’s emotionally exhausting to worry about money in retirement, especially if you feel isolated or ashamed.
But it’s vital to remember:
- You’re not alone—millions of retirees are in the same position
- Asking for help is a strength, not a weakness
- There is a path forward, even if it’s slow
Talking to someone, whether a friend, family member, or trained adviser, can ease the emotional toll and help you think clearly.
Step 8: Be cautious with equity release or borrowing against your home
Equity release might be offered to clear debts by accessing the value tied up in your home.
While this can be an option for some, it has serious long-term implications, especially for inheritance and benefit entitlement.
Before considering equity release:
- Get independent financial advice
- Explore all other options first
- Make sure family members understand the impact
- Use only regulated, FCA-approved providers
It should never be a rushed or pressured decision.
Progress is possible—even later in life
Managing debt in retirement is difficult, but not impossible. You don’t need to solve everything overnight.
What matters is taking steady, realistic steps to reduce the pressure and protect your wellbeing.
To recap:
- Start with a clear view of your income and debts
- Prioritise housing, bills, and council tax above unsecured debts
- Rework your budget for life after work
- Avoid relying on credit cards to get by—seek extra support where available
- Speak to creditors early to arrange easier terms
- Get free advice before making big decisions or agreeing to formal solutions
- Take care of your mental health and don’t suffer in silence
You’ve handled challenges your whole life—and you can handle this one too, with the right guidance and support.
Here’s a free downloadable checklist to use to help manage debt in retirement. No catch!
