If you’re passionate about travelling, chances are you’re already drafting up a bucket list of far-flung destinations that you’d like to explore once your work commitments are over. However, is retirement travel in decline? Research from True Potential Investor, a provider of stocks and shares ISAs and personal pensions seems to suggest so.
In True Potential Investor’s Tackling The Savings Gap Consumer Savings and Debt Data Q3 2016 publication, a disparity in travel attitudes between age groups became strikingly visible. 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.
Despite just over 2% of over 55s saying they would do the same, a quarter of 25-34 year olds said they would use their 25% tax-free lump sum to fund a round-the-world trip. Highlighting a clear disparity in attitudes, perhaps this difference could be attributed to 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 pension pot.
In total, over the course of their lives, the average 55 year old will accumulate a £51,446 pension pot. 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 pot.
Based on the sum of £12,900, retirees could take a 35-day trip halfway across the South Pacific. This is based on a single traveller; throw a partner into the mix and the trip would take them from Panama Canal to California.
What about attitudes to holidays in general? Are they changing too? It seems that over 55s 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.
What can we attribute this change of attitude to? Could it be 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 contributing sooner, no matter how small the amount.
The report’s findings also show a positive shift in pension attitudes in young people. 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.