How are retirement plans changing?

Pension pressures and debt demands seem to be altering people’s attitudes towards their retirement plans. Following a time when a round-the-world trip was the retirement dream for many, it seems this dream is becoming out of reach for many people approaching retirement age. A recent survey by personal pension provider, True Potential investigates further.

Their survey suggests that the younger generation could be the only ones hoping to keep the dream alive. The figures show that 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, whereas 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 pension savings.

According to the research, the average 55 year old has a pension pot worth £51,446, which 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. 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. Realistically, the tax-free sum would only get you halfway around the world, condensing your trip to just 35 days. Not quite the trip they had in mind. 

Whilst thinking realistically, it seems over 55s are also beginning to think that regular holidays will also be out of reach during retirement. 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 was is to blame for these changes in attitudes? It seems to 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 to their pension sooner, no matter how small the amount.

However, this doesn’t seem to be the case, but rather the opposite according to figures from True Potential. 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.