For those reaching retirement age — and those who are a long way off—travelling is widely considered as the ultimate retirement goal. After all those years of working hard, retirement gives us the chance to get out there and explore the world. But is this still the case?
Recent research by True Potential Investor, providers of stocks and shares ISAs and personal pensions, has suggested that the over 55s are giving up on their travel dreams — while 25-34 year olds remain positive about travelling in retirement.
As part of True Potential’s Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016 report, a quarter of 25-34 year olds would use their 25% tax-free pension lump sum to fund a round-the-world trip. In contrast, 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 pensions.
By retirement, the average 55 year old will have accumulated £51,446 in their pension pot. Of this, £12,900 would be available tax-free — significantly less than 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.
In reality, a trip halfway across the South Pacific would eat up the majority of their tax-free amount, cutting their 120-day trip down 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.
Holidays too are being impacted as a result of this change in retirement attitudes. 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.
This shift in attitudes can be attributed to a growing realism around pensions. 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.
But could this all be set to change? 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.
Complete the retirement quiz from True Potential Investor to help provide you with an indication of how much you’ll be requiring in your pension pot, to see you through your retirement days.