After working all your life, most of you will have plans to treat yourself during retirement by doing something you haven’t been able to do whilst juggling a busy work schedule. 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, does your retirement dream seem out of reach thanks to pension pressures and debt demands? A recent survey by True Potential suggests this might be the case.
Whether you’ve chosen a personal pension or some kind of workplace pension, there is 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 according to the survey results, it seems that 25-34 year olds are keeping this dream alive.
In fact, 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, when over 55s were asked the same question, only 2% said the same. Perhaps the dream is slipping away for those who are closer to retirement age. 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.
According to the research, the average 55 year old has a pension pot of around £51,446 to look forward to. This would deliver a tax-free lump sum of around £12,900 — an amount that would be dramatically dented when spent on 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. Not quite the trip that they originally had in mind.
For over 55s, it’s not just their attitudes towards a big travel holiday that are changing. According to the research, only 10% of them said they would take regular holidays. It seems holidays in general are also feeling like they are out of reach. When 25-34 year olds were asked, a larger percentage of 34% said they would take regular holidays during retirement.
True Potential attributes the change in attitudes 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.
Whilst the younger generation generally has a more positive outlook to retirement plans, 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.