For many years, the ultimate retirement goal has been to travel. As we contribute to our pension pots, we have our destination bucket list at the front of our minds – but are we doing enough to make this dream a reality?
True Potential Investor, a provider of personal pensions and stocks and shares ISAs, has unearthed a split in attitudes across younger and older age categories when it comes to retirement travel.
In the Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016 report, True Potential Investor has found that 25% of 25-34 year olds plan to spend their 25% tax-free pension 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 pensions.
At retirement, a 55 year old will have 51,446 in their personal pension pot. 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 pot.
Rather than a round-the-world trip, with their tax-free amount, the average 55 year old could afford a trip halfway across the South Pacific, lasting just 35 days instead of 120. This is based on a single traveller; throw a partner into the mix and the trip would take them from Panama Canal to California. This is all well and good, but when you realise you need to live another 35-40 years on your pension, it’s not wise to blow it all on a holiday.
So, while the round-the-world trip may be out of the question, what about holidays more generally? 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. Over 55s are generally more aware of the potential expenses they need to consider, with care being a large financial burden as age creeps in. At-home care packages (click to view listing) are generally cheaper than 24/7 retirement home care, but many often need full care at some point in late retirement, so it’s easy to see why over 55s are more careful with their money.
A growing realism amongst pension contributors is a reason for the shift in pension attitudes. 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 putting cash aside sooner, no matter how small the amount. They are aware that during their retirement phase, they may have to opt for respite care in Tinton NJ (or wherever they are based) or settle in their own house with children and grandkids. Hardly, a small population might take the decision to travel across continents. Therefore, it might be a wise choice if they are presented with options right after the start.
Overall, pension attitudes are positively shifting. 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.
Find out how much you’ll potentially need in your pension pot by the time you retire by completing a quiz from True Potential Investor today!