The number of people aged over 65 applying for payday loans has almost doubled in just two years, according to new research.
Figures from short-term credit broker CashLady revealed a 95 per cent increase between 2015 and 2017 in the number of pensioners turning to short-term financial help to top up their monthly pension.
The average monthly income of older people applying for these loans went up by £157, from £1,478 to £1,635, in the same period.
Despite a 10 per cent rise in monthly income, the research revealed the loan amount requested had increased by 26 per cent – suggesting pensioner income is struggling to keep pace with the rising cost of living.
In the space of two years, the average amount individuals applied for has increased by £80, from £302 in 2015 to £382 in 2017.
Chris Hackett, managing director of CashLady, said these figures suggest there were more and more older people living off their pensions yet struggling to make ends meet.
He said: “Inflation has been stuck at a high level for the last five years and while pensions have gone up, the shortfall between income and the cost of living is becoming increasingly apparent.
“The challenge for many of these applicants is our lenders will only approve loan applications if the person is in employment, which effectively rules out short-term loan options for those already retired.”
Earlier this month, research from the Pensions Policy Institute (PPI) revealed millions of people were almost completely reliant on a basic state pension of just £7,000 a year to pay their bills and live in retirement.
The report showed that for the poorest pensioners, £3 in every £4 of their income comes from the state pension.
The poorest pensioners are also seeing the lowest rise in income, since pension credit is set to increase by less than the state pension next April.
Paul Gibson, managing director of Granite Financial Planning, said he was surprised with the research results.
He said: “I don’t think most financial advisers clients would typically fall into this category and none of my retired clients have any borrowing requirement.
“Whilst the data may be accurate the annual percentage rate quoted on CashLady website of 1,272 per cent is quite staggering. It seems to be akin to putting petrol on a fire to try and put it out.
“If people are genuinely struggling I would hope there are better ways to cover this short-term debt, but high street banks’ lending criteria has now become so restricted they are not helping the problem as perhaps they should be.”
Source: FT Adviser