For many, retirement is the opportunity to get out there, see the world and tick those dream destinations off your bucket list. It has long been the dream, yet new research from personal pension and stocks and shares ISA provider, True Potential Investor, suggests that these travel plans could be a thing of the past.
The provider’s Tackling The Savings Gap Consumer Savings and Debt Data report shows a very distinct split in retirement expectations between age groups. 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.
A quarter of 25-34 year olds said they would fund their round-the-world trip using their 25% tax-free lump sum. Conversely, 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.
£51,446 is the amount the average 55 year old will have in retirement. £12,900 would be the tax-free amount from a pension pot of this size — 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.
Cutting their 120-day trip to just 35 days, this tax-free amount would only take them 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.
Round-the-world trips are an extravagance and come with a similarly high price tag — so are attitudes changing towards holidays more generally? 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 has triggered the over 55s to change their retirement travel plans? It is largely a result of people realising the true potential of their pension pots. 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 setting money aside sooner, no matter how small the amount.
Despite this, pension attitudes are certainly moving in the right direction. In Q3 2016, just 19% of 24-34 year olds failed to make a contribution to their personal 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.
True Potential Investor have the perfect quiz to help you determine how much you’ll potentially require in your pension pot by the time you hit retirement. Visit their website to complete the quiz now.