When it comes to retiring, it’s time to relax and do all the things we’ve never had any time for. Some of us plan to treat ourselves to a dream holiday, while others want to put their feet up and spend more time on their hobbies. It’s a time in life to look forward to. However, could our retirement dreams be shattered by pension pressures and debt demands? A recent survey by stocks and shares ISAs and personal pension provider, True Potential Investor, suggests so.
The results suggest there is a significant split between retirement expectations within 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.
The survey showed that 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, over 55’s seem to have a more realistic outlook regarding their pension pots concerning affordability, with just 2% of over 55s saying they would use their tax-free lump sum for a dream holiday. 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 pension pot for over 55 year olds is a sum of around £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.
With the cost of a round-the-world trip amounting to the full price of the average pension pot, 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.
Attitudes to holidays in general have also changed – just over 10% of over 55’s said they would take regular holidays during retirement. It seems then, that they think regular breaks are out of their reach as well. However, 34% of 25-34 year olds said they would take regular holidays in retirement – a clear difference in opinion.
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 encourage young people to start contributing to their pensions sooner, no matter how small the amount.
It seems that young people’s attitudes towards pensions are changing too, and for the good. 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.
Do you want to find out how much you’ll possibly need in your pension pot, for your retirement? Visit True Potential Investor’s website and to complete their interactive quiz.