As you approach retirement and your pension tax-free lump sum becomes within reach, can you afford your retirement plans?
After working all of your life, when retirement arrives, you look forward to having the spare time available to be able to do all the things you haven’t had time for whilst juggling a busy work schedule. But the realistic question you might have to ask yourself is: are pressures and debt demands crushing our retirement dreams? A recent survey by personal pension provider, True Potential Investor, suggests so.
people are only becoming aware of the reality of their pension pots when it’s too late
For a number of years, a round-the-world trip has been the retirement dream for many and as the survey found, it seems that the younger generation of 25-34 year olds are keeping this dream alive.
In Q3 25% of 25-34 year olds said they would like to spend their 25% tax-free 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 pension potential, over 55s are closer to retirement and are therefore more aware of the limitations of their pension savings.
To fund a round the world trip, such as a 120-day Miami-to-Miami cruise, you would need around £48,000! According to the research, this would be out of reach for most people close to retirement, as figures suggest that the average 55 year old has a pot worth £51,446. This would deliver a tax-free lump sum of around £12,900 — an amount that wouldn’t even cover half of that trip. The trip would cost nearly the entirety of an average 55 year old’s pension savings.
future retirees may not need to give up on their travel dreams
As reality hits home with regards to people’s pension pots, it seems attitudes towards holidays during retirement in general are changing. In fact, over 55s seem to think regular holidays would also be out of reach. 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 was is the reason behind these changed attitudes? True Potential Investor 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 hopefully encourage the younger generation to start contributing to their pension pots sooner rather than later.
The survey revealed that in Q3, 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.
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