After dedicating most of our lives to work responsibilities, retirement is a time where we can focus on those things we have always wanted to do but have struggled to find the time for. 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. For a number of years, a round-the-world trip has been the retirement dream for many. But are those dreams about to be crushed by pension pressures and debt demands? It seems our attitudes towards retirement plans suggest so.
Following a survey by personal pension providers, True Potential, it seems that 25-34 year olds are keeping this dream alive. Findings show a significant split between retirement expectations in different age groups.
When you reach the age of 55, you are entitled to 25% of your pension pot tax-free. When asked what they would spend their tax-free lump sum, 25% of 25-34 year olds said they would like to spend it on a round-the-world trip (as per Q3 2016). 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.
According to the research, the average 55 year old is set to receive a tax-free lump sum of £12,900. This is based on research showing the average pension pot is worth £51,446. This amount is not likely to stretch to fund a full 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.
In addition, it seems general holidays also feel out of reach for over 55s. 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 what is the reason behind these changed 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 setting money aside for their pensions sooner, no matter how small the amount.
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.