What are your plans for retirement? Whether you’re putting your feet up, dedicating more time to your hobbies or enjoying quality time with your loved ones, we all have different retirement dreams. However, are pension pressures and debt demands changing what we’re dreaming of? A recent survey by personal pension provider, True Potential, suggests so.
The survey’s findings show a significant split between retirement expectations in different 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.
In Q3 2016, 25% of 25-34 year olds said they would like to spend their 25% tax-free pension lump sum on a round-the-world trip. 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 savings.
The research shows that the average 55 year old has 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 savings.
In reality, the tax-free amount would likely take them halfway across the South Pacific, cutting their 120-day trip to just 35 days. 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 round-the-world trips that over 55s are realising are out of their reach. 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.
But why are those close to retirement age changing their attitudes? True Potential 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 saving sooner, no matter how small the amount.
However, it seems that young people’s attitudes towards pensions are changing too. 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.