Travel and retirement go hand in hand-but is that all set to change? Research from stocks and shares ISA and personal pension provider, True Potential Investor’s Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016 shows a clear shift in attitudes to travelling in retirement.
The findings show a clear split in attitudes across different age groups. For example, while a quarter of 25-34 year olds would spend their 25% tax-free sum on a round-the-world trip, just 2% of over 55s said they would do the same.
Could this be because over 55s have a more realistic outlook when it comes to their pension pots? 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.
51,446 is the average personal pension pot that an over-55 will have in retirement, making a tax-free sum of 12,900 available. The actual cost of a round-the-world trip dwarfs this amount. 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. Therefore, realistically speaking, they can use the same amount of money to fund a large part of their retirement life, which includes paying for an assisted living facility, medical treatment, everyday expenses, etc.
Also, instead of the 120-day round the world trip, their 12,900 budget would take them just halfway across the South Pacific. This is based on a single traveler; throw a partner into the mix and the trip would take them from Panama Canal to California.
Attitudes towards holidays more generally are also changing. 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 causing this reality check for pension contributors? 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. If not for travelling, they can at least save money to explore other options like starting their own small business or relying on respite care from professionals during their old age.
However, pension attitudes in the younger generation have positively shifted. 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.
With an interactive quiz from True Potential Investor, you can complete some questions about your current expenditure and future plans to help figure out how much you’ll roughly need in your personal pension pot by the time you reach retirement.