Just like life goals differ depending on the individual, so do retirement plans. However, are pension pressures and debt demands changing what we’re dreaming of? A recent survey by True Potential suggests so.
It seems that recent findings show that different generations have different expectations when it comes to retirement. 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.
Different age groups are looking at their pension pots differently. 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, 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 personal pension potential, over 55s are closer to retirement and are therefore more aware of the limitations of their pension savings.
Looking at their pension realistically seems to have put over 55s off their dream. The research shows that 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 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 savings. Is it worth it?
The tax-free amount is not likely to cover their dream trip – in fact it would likely only take them halfway across the South Pacific, cutting their 120-day trip to just 35 days. This is based on a single traveler; throw a partner into the mix and the trip would take them from Panama Canal to California.
While round-the-world trips are the big dream, regular holidays are another luxury people look forward to in retirement. However, this is another dream that could be getting crushed as over 55s are realizing they are out of their reach. It seems they 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 what is the reason behind these 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 start saving sooner, no matter how small the amount.
While the younger generations are still dreaming of their big trip around the world, it seems it could be out of reach for them too. However, 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 just yet.