According to True Potential Investor’s Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016 report, our retirement dreams are changing — and more of us are giving up on our hopes of travelling. Here, the personal pension and stocks and shares ISA provider examines their findings in more detail:
Interestingly, the report’s findings outline the disparity in travel attitudes in retirement between 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.
Within 25-34 year olds, a quarter said they would use their 25% pension lump sum to pay for a round-the-world trip. It’s a different story for over 55s, with just 2% saying 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.
On average, a 55 year old will have accumulated a £51,446 pension pot, which would deliver a tax-free sum of approximately £12,900. However, the actual cost of a round-the-world trip is significantly higher than this. 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.
So where could they travel to with the £12,900? Instead of the round-the-world cruise, the typical 55 year old could in reality afford to travel 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.
Holidays more generally have also taken a hit. 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.
So what is making those close to retirement change their attitudes? Could it be the result of a 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 putting money aside sooner, no matter how small the amount.
Despite these disparities, it’s clear that attitudes to pensions are heading in the right direction. 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.
Complete a quiz from True Potential Investor to help guide you on how much you’ll need in your pension pot by the time you reach your retire days.