1 trillion crisis looms as pensions deficit and consumer loans snowball out of control

UK pensions deficit soared by 100Bto 710B, last month

200B unsecured consumer credit time bomb warn FCA

8.3 million people in UK with debt problems

2.2 million people in UK are in financial distress

‘President Trump land’ there is a savings gap of $70 trillion

Global problem as pensions gap of developed countries growing by $28B per day

Editor: Mark O’Byrne

There is a 1 trillion debt time bomb hanging over the United Kingdom. We are nearing the end of the timebomb’s long fuse and it looks set to explode in the coming months.

No one knows how to diffuse the1 trillion bomb and who should be taking responsibility. It is made up of two major components.

  • 710 billionis the terrifying size of the UK pensions deficit
  • 200 billion is the amount of dynamite in the consumer credit time bomb

How did the sovereign nation that is the United Kingdom of Great Britain and Northern Ireland get itself so deep in the red?

This is not a problem that is bore only by the Brits. In the rest of the developed world a $70 trillion pensions deficit hangs heavy.

We are all in this boat because we apparently didn’t learn from the massive man made crisisthat was the 2008 financial crisis.

The ‘we’ is referring to UK individuals who are on average holding 14,367 of debt. It refers to the pension fund managers who are ignoring the fact they hold more liabilities than assets. It refers to banks and mortgage and loan providers who give loans to people who are already indebted and who will struggle to pay the debt back. It refers to a compliant media who do not have ask hard questions about irresponsible lending practices and cheer lead property bubbles due to getting significant revenues from the banking and property sectors.

And, ultimately the ‘we’ is the government who peddled such terrible monetary policy that it has brought us as close to nuclear financial disaster as we have been since 2008.

In the red, everywhere

In the United Kingdom we are running a deficit not only in our day-to-day lives but also in our future lives.

Unsecured consumer credit is now at 2008 levels. There is 200 billion of unsecured credit. The FCA’s Andrew Bailey has put this dangerous issue at the top of the regulator’s agenda.

unsecured consumer credit

However it is not just for the FCA to be dealing with. There is no one organisation responsible for the huge levels of personal debt that will eventually cause this financial system to implode.

There are 8.3 million people in the UK with debt problems. The number of debtors falling behind on payments increased by 40% in the first half of this year.

The problem shows no sign of improving: 45% of the 65billion of credit card debt is managed using the 0% transfer balance offers. But with half of those that transfer, the balance remains the same at the end of the period.

Earlier this year the Bank of England’s director for Financial Stability warned lending standards were at risk of going ‘from responsible to reckless very quickly’. This comes to mind when you consider that 86% of cars are now bought on PCP (personal contract purchase).

So concerned are financial observers with the UK’s personal debt crisis that in July this yearMoody’s downgraded the outlook on bonds backed by credit card customers, buy-to-let mortgages and car loans.

Greg Davies, Moody’s assistant vice president warned:

Household debt is high and still growing, leaving consumers vulnerable to an economic downturn, while higher inflation, weaker wage growth and levels of indebtedness leaves those in lower-income brackets the most exposed.

So in our day-to-day lives we are over 200bn in debt. How on earth could we possibly save for our futures?

Sadly, this is a struggle as well. Not just because of our debt but thanks to the rising cost of inflation and stagnant wages and underfunded pension pots in both public and private sectors.

Nest egg isn’t looking so cosy

Ageing populations, low birth rates and dire monetary policy means that over 27 million people in the UK will not be receiving adequate pensions once they retire.

These 27 million are those relying on aa defined-benefit (DB) pension such as a proportion of final salary, index-linked to inflation for life.

Those who aren’t relying on a DB pension are in just as dire straits.

Savers in modern defined-contribution (DC) plans where there are no g