We all have retirement plans, whether it’s enjoying some well-earned rest or doing more of the things you love. However, if you dream of travelling, new research from True Potential Investor suggests this could be a thing of the past, as a result of growing pension pressures and debt demands.
The findings from the personal pension provider’s survey show how different age groups have very different retirement expectations. For a number of years, a round-the-world trip has been the retirement dream for many — and it seems that 25-34 year olds are keeping this dream alive.
The Tacking The Savings Gap Consumer Savings & Debt Data Q3 2016 report shows that a quarter of 25-34 year olds plan on taking a round-the-world trip using their 25% tax-free pension lump sum. However, just 2% of over 55s said the same. Perhaps this disparity between age groups is a result of a more realistic outlook from over 55s. While 25-34 year olds are hopeful about their pension potential, over 55s are closer to retirement and are therefore more aware of the limitations of their pension fund.
Come retirement, the average 55 year old will have a pension pot worth £51,446. This would deliver a tax-free lump sum of around £12,900 — an amount that is dwarfed by the actual cost of a round-the-world trip. For example, a mid-range ticket on a 120-day Miami to Miami world cruise costs around £48,000 — nearly the entirety of an average 55 year old’s pension pot.
The tax-free amount alone will in reality cut a 120-day trip to just 35 days and, instead of seeing the world, they could only afford to travel halfway across the South Pacific. This is based on a single traveller; throw a partner into the mix and the trip would take them from Panama Canal to California.
It’s not just once-in-a-lifetime trips that over 55s are giving up hope on. It seems they are also changing their views on holidays in general in retirement. Just 10% of over 55s said they were going to take regular holidays once retired, while 34% of 25-34 year olds said the same.
So, what is causing this shift in attitudes? True Potential Investor attributes it to growing realism amongst pension savers. The survey suggests that people are only becoming aware of the reality of their pension pots when it’s too late, which should motivate young people to start contributing sooner, no matter how small the amount.
Young people’s pension attitudes are also changing. In Q3 2016, just 19% of 24-34 year olds failed to make a contribution to their pension pots, down from 26% in the previous quarter. With this figure expected to grow, future retirees may not need to give up on their travel dreams.