Key Retirement Solutions has claimed that up to one in five over-65s have borrowed money or expect to have to borrow to help boost retirement incomes.

Its nationwide study suggests demand for credit among the over-55s remains high with around 22% applying for credit cards, loans or overdrafts in the past year – among the over-65s the number applying is around 16%.

However, KRS warned that they run significant risks of being rejected with 12% of over-55s being turned down for some form of credit: they are most likely to be rejected for credit cards with 70% of those who have been turned down being refused a new card while 26% have been rejected for a loan and 13% have been refused an overdraft increase.

The equity release firm’s analysis shows the choice and range of credit available drops significantly with age – the average under-65 with good credit can choose from up to 85 personal loans. But that falls to 44 loans for those aged 65 and to 37 for those aged 70. Over-65s without good credit ratings will only be able to apply for four or fewer loans.

Credit card companies do not impose age limits for new applicants but may impose minimum incomes while mortgage lenders impose age limits on loans. The research shows the average over-65 who has unsecured debts owes around £3,720 while those aged 55 and 64 owe an average £4,300.

Many do not expect to clear their debts before retirement – 27% of those aged 55 and over do not expect to be debt-free excluding mortgages before they retire and 25% of over-65s say they have not cleared debts. Around 4% of over-65s say they’ve had credit card limits cut in the past 12 months.

Dean Mirfin, group director at Key Retirement Solutions, said: “Access to credit is a major issue for the over-55s and more particularly for the over-65s as demand remains high while lenders remain wary and the risk of rejection is high.

“Nearly one in five over-65s expect to or have already borrowed money in retirement and the ability to borrow is important in order to be able to fund major expenses and maintain their standard of living.

“Recovery in the wider economy is feeding through to pensioners but low annuity rates and the lingering effects of endowment mis-selling means retirement incomes remain under pressure.

“During a week of focus on debt, it is imperative that we accept that for some the ability to borrow money can be a vital lifeline. For those aged over 65 especially the challenge to not only access borrowing but at the levels required must not be understated.

“There are however solutions for pensioners and especially for homeowners who are literally sitting on wealth thanks to the housing market recovery. People need to take advice on how best to maximise their wealth in retirement.”