After working your entire life, most of us look forward to retirement as a time to do all the things we didn’t have time for whilst working hard at our careers. A dream holiday or a round the world trip are popular choices for retirement but as pension pressures rise and debt demands linger, are we changing our retirement dreams? A recent survey by personal pension provider, True Potential, suggests that might be the case.
According to the survey, it seems 25-34 year olds are the only ones keeping the retirement dream alive. 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 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 average 55 year old has a pension pot worth £51,446, meaning they would be entitled to 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.
Realistically, the tax-free amount wouldn’t cover the cost of a round the world trip – in fact, 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 seems that over 55s have also changed their attitudes towards holidays in general, realising they too might be out of their reach. 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.
True Potential has attempted to uncover the reason behind this change, attributing 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.
Figures show that 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.