Retirement is our reward for our years of hard work, late nights, early starts and stressful days. Many of us look forward to it, as it’s an opportunity for us to do the things we love with our friends and family — some much-needed quality time that unfortunately often gets squeezed out of our working schedules.
In the past, retiring and heading off on a round-the-world trip has been the ultimate aim. However, the Tackling The Savings Gap Q3 2016 report, created by personal pension provider True Potential, has suggested that our priorities are changing — especially in the over 55s.
When asked if they would spend their 25% tax-free pension lump sum on a round-the-world trip, just 2% of over 55s said they would. In contrast, a quarter of 25-34 year olds said the same. Clearly, the younger generations are more positive about the possibilities their pension pots could offer. Over 55s, on the other hand, are closer to retirement and are therefore more aware of their pension pots and limiting factors.
The average 55 year old reaches retirement with a £51,446 pension pot, which would deliver a 25% tax-free sum of £12,900. The cost of a round-the-world trip dwarfs these figures. A mid-range ticket on a Miami to Miami 120-day world cruise costs around £48,000* — almost the entirety of the total pension pot and more than three times the tax-free sum.
In reality, this tax-free amount would get a single traveller halfway across the South Pacific and shorten their trip to just 35 days. For two people, the journey is reduced again, taking them from Panama Canal to California.
It’s not just round-the-world trips that we’re putting on the back burner; it seems holidays are slipping down our list of priorities too. The same survey found that just 10% of over 55s planned on taking regular holidays in retirement compared to 34% of 25-34 year olds.
So why have these attitudes changed? True Potential credits the changes with a growing realism around pensions. Awareness is growing around the importance of putting money away for retirement, which should motivate young people to start putting cash aside now so they are well-prepared for the future — especially if they want to afford that round-the-world trip.
* Based on brochure price of a 120-day cruise with Oceania, staying in an ‘Ocean View’ room
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