After working for the majority of your life, it is likely that you have made some dream plans for retirement. But as pension pressures and debt demands rise, are your retirement plans realistic? A round-the-world trip has been the retirement dream for many – but is it affordable now? In a recent survey by personal pension provider, True Potential, they question if our retirement plans are out of our reach.
Unfortunately, the survey’s figures suggest so. In fact, they suggest that the younger generation of 25-34 year olds are the only ones keeping this dream alive. 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, as for the generation close to retirement, 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 figures suggest that a dream round the world trip is now unaffordable for the retired. The average 55 year old has a pension pot worth £51,446. This would deliver a tax-free lump sum of around £12,900 – an amount that wouldn’t cover the costs of a round the world trip. To put this into perspective, it might actually cost the entire pension pot for the dream trip. For example, a mid-range ticket on a 120-day Miami to Miami world cruise costs around £48,000.
With round the world trips seemingly out of our reach, what does this mean for holidays in general? It seems over 55’s are also changing their views on holidays in general in retirement. 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 why is it that our dream retirement plans are so far out of our reach? True Potential attributes it to growing realism amongst pension savers. The survey suggests that people are starting to contribute to their pensions when it is too late, meaning their pot isn’t substantial enough to fund their plans. This should hopefully encourage the younger generation to start contributing sooner, however, that doesn’t seem to be the case. In fact, 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.