As reported by The Telegraph, following 2008’s financial crash, Britain’s household debt is now at the highest it’s been since. According to the Bank of England, we borrowed £192.2 billion in November 2016 alone, of which £66.7 billion of that was spent on credit cards. The data revealed a 10.8% increase year on year.

So, with debt levels high and showing no signs of reducing, what does this mean for our pension plans? Research from personal pension provider, True Potential Investor, in their Tackling The Savings Gap Q3 2016 report suggests that our spending now could be severely limiting how comfortable we are in later life.

Whilst financial advisors advise people to clear debt as soon as possible to prevent interest charges, True Potential’s Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016 report revealed that many people reach retirement age with debt, and some are continuing to build new debt. In Q3 2016, for example, over 55’s borrowed an average of £1,108.

The report also revealed that a fifth of respondents would use their 25% tax free amount from their pension to clear their debt. Likewise, 42% of savers said that they would use an unexpected £1,000 windfall to pay off debts.

So how does this influence our pension potential? An increase in debt naturally means less money available to put aside towards your pension. And whilst your retirement might seem like a lifetime away, it’s important to start contributing as soon as you can. There is a worrying difference between expectations and reality when it comes to your pension pot. Research has shown that an annual income of £23,000 is required in retirement to live comfortably. However, people are only on-course to receive £6,000 a year in retirement. Any extra debt can impact the figure even more.

It’s not all bad news though. With greater financial knowledge and awareness, there has been an increase in the number of people contributing to their pension between Q2 and Q3 2016. In fact, the number of people who contribute nothing towards their pension dropped in Q3 2016, down to 35% from 39%. With those figures in mind, it seems there is potential for more people to enjoy a more comfortable retirement.

With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Tax rules can change at any time.