Everybody has their own picture of the perfect retirement, but for many of us, it involves travelling. Without the restriction of work, you’re free to go away whenever you like, and many retirees take the opportunity to tick off exciting destinations on their bucket list.
However, if you want to travel in your later years, you’ll need to consider how you’ll fund your adventures.
To help with this, Pensions UK recently published research showing the various kinds of holidays you can afford, depending on the size of your retirement pot.
The findings, as reported by MoneyWeek, break down different categories of retirement living standards, and explore the travel goals you might be able to fund.
Read on to learn more.
You can still afford a regular break in the UK if you achieve a minimum standard of living in retirement
According to Pensions UK figures, a single person would need to spend £13,400 a year, while a couple would spend £21,600 between them to achieve a “minimum standard of living” in retirement.
It’s estimated that three-quarters of households will achieve this as the full State Pension amount makes up most of this amount for a single person and all of it for couples.
You might think that a minimum standard of living would only cover the bare essentials, and all travel plans would be out of the question. However, the Pensions UK figures suggest that you’d be able to afford an annual break in the UK, albeit in relatively basic accommodation.
For instance, the research shows you could afford a seven-night break in Norfolk in a caravan, with access to a swimming pool. This includes £720 spending money for the week.
You might be happy travelling in the UK. After all, there are plenty of wonderful places to visit. However, if you have ambitions to travel further afield, you may need to build a larger retirement pot.
A moderate retirement budget gives you more flexibility to travel abroad
Pensions UK defines a “moderate” retirement budget as £31,700 for a single person, meaning you’d need a pension pot of £330,000 to £490,000. Meanwhile, a couple would need to save £165,000 to £250,000 each, giving them a combined annual income of £43,900.
If you reach this level of savings, you’ll have more flexibility over where you can travel and would be able to incorporate an overseas trip into your budget each year.
The Pensions UK research suggests you could afford a two-week, all-inclusive holiday somewhere warm such as Spain, Tenerife, or Turkey.
You’d also have enough for a separate UK mini-break for three days each year.
Naturally, these are only guidelines, so you might opt for several shorter trips or pool all your funds into one more expensive holiday.
A larger pension pot offering a comfortable retirement means you can afford premium destinations
There are certain destinations that could be out of your price range, even if you save enough for a moderate retirement.
To visit these places, and travel more often, you might need to aim for a “comfortable” retirement.
According to Pensions UK, this would require a retirement pot of £540,000 to £800,000 for a single person, or £300,000 to £460,000 per person for a couple.
This would leave a single person with an annual income of £43,900 and a couple with £60,600.
With this income, you could take more expensive trips, such as a 12-day cruise in Norway and Iceland, which would reportedly cost £2,239 per person.
As well as a two-week trip abroad, you could afford around three long weekends away in the UK.
So, if you’re planning to travel further afield and visit more expensive destinations, you might need to save enough for a comfortable retirement.
It’s important to consider your own travel bucket list when planning for retirement
As this research shows, the travel goals you can achieve vary significantly depending on how much you save in your pension pot.
However, it’s important to bear in mind that these are only guidelines and you’ll need to consider your own travel bucket list.
There might be one or two key destinations you want to visit, after which you will be happy to stay in the UK. In this case, you don’t need to budget as much for travel after the first few years of retirement.
Conversely, you might want to travel more than even a comfortable retirement budget would allow. If you have plans to take several trips a year and tick off as many countries as possible, you may need to take action sooner to increase your retirement savings.
We can discuss your travel plans with you, no matter how ambitious, and help you create a financial plan that gets you where you want to go.
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Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.