When it’s your time to retire, you’ll most likely have some plans to enjoy yourself. Whether that’s relaxing or jetting off on your dream holiday, your plans will be well deserved. We all have different retirement dreams, but are pension pressures and debt demands placing them out of our reach? True Potential, suggests so.
According to a survey by True Potential, it suggests that different age groups are split when it comes to their expectations for retirement. For a number of years, a round-the-world trip has been the retirement dream for many — but now it seems that 25-34 year olds are the only ones aiming to keep this dream alive.
You are entitled to 25% of your pension pot in a tax-free pay out when you reach the age of 55. In Q3 2016, 25% of 25-34 year olds said they would like to spend this lump 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.
The average pension pot is worth £51,446 for over 55s, meaning this would deliver a tax-free amount of around £12,900. For those who utilise this for a round the world trip, they would find that the trip takes a big lump of that sum in one go. 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.
As reality hits home for most over 55’s, it seems holidays in general also seem out of their reach – as 10% of over 55s said they were going to take regular holidays once retired, while 34% of 25-34 year olds said the same.
True Potential attributes the change in attitudes to the 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 investing sooner, no matter how small the amount.
However, whilst the younger generation seems to remain optimistic, their attitudes towards contributing to their pensions are changing. In Q3 2016, whether they have workplace pensions or a personal pension, 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.