DIY Investor Magazine
| August 2017
14
CAN YOU AFFORD YOUR
RETIREMENT PLANS?
Survey suggests that dreams of the round-the-world
cruise may be sinking fast.
As you approach retirement and your 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 pension pressures and debt demands crushing
our retirement dreams? A recent survey by personal
pension provider, True Potential Investor, suggests so.
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 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. 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 pension 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 olds pension savings.
PEOPLE ARE ONLY BECOMING AWARE OF THE REALITY OF
THEIR PENSION POTS WHEN IT’S TOO LATE
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 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.
