A pensions expert has shared insights on how to ensure you can still afford to travel and enjoy holidays after retirement. The lifestyle one can afford during retirement largely depends on the amount saved during their working years.
The Retirement Living Standards, calculated by the Pensions and Lifetime Savings Association (PLSA), is a key index used to determine the required pension income for a comfortable retirement. For a single person desiring two foreign holidays per year, an annual pension income of £37,300 is necessary, while couples would need £54,500.
In contrast, the minimum retirement standard would require a yearly pension income of around £12,800 for singles and £19,900 for couples. According to the PLSA, this level wouldn’t cover foreign holidays.
For those who love to travel, Chartered Financial Planner Jeannie Boyle from EQ Investors has offered advice on ensuring affordability for overseas trips post-retirement.
She told the Mirror it’s vital to start saving into your pension as early as possible.
The sooner you begin saving for your retirement travels, the better off you’ll be. Ms Boyle advised: “The longer money is invested, the more value it has. For example, investing £50 a month with five percent per annum growth from the age of 20 will give twice as big a fund at the age 60.”
Ms Boyle advises taking the time to sit down and plan your travel destinations and their associated costs. She suggests: “Take the time to regularly picture yourself on your desired travel holiday, whether this is a beach or on the ski slopes, as you’re more likely to be committed to your pension savings this way.”
“Writing out the list of places you want to go will help motivate you to save and remind you of your reasons for it. It will also allow you to start putting together a budget for each trip.”
She warns against setting an overly strict budget, stating: “It’s important to find a balance between saving for the future and living now. The 50/30/20 rule is helpful for this. This rule is one way to understand how to allocate your income.”
“50 percent is spent on things you need such as housing costs, utilities, food and 30 percent is spent on luxuries or lifestyle choices such as holidays or entertainment. With the last 20 percent that should be put towards long term savings such as your pension.”
She also recommends consulting with a financial advisor, saying: “A financial advisor can help you plan your pension withdrawals as you can take up to 25 percent of your pension as a tax-free lump sum. This is useful for funding a big trip to celebrate the end of work.”
Lastly, she advises checking with your employer about pension contributions.
Some employers offer to increase their pension contribution if you also increase your payment too. Ms Boyle said: “It’s a good idea to take up this offer if you can afford to as it’s a really easy way to boost your savings and boost your travel spending pot. Under the auto enrolment rules employees must save five percent into their pension and employers must pay at least three percent.”
Ms Boyle also advises opening an ISA, which is a type of savings account where you never have to pay tax on the interest you earn – for pension savers, they also allow you access to your savings from a younger age than your private or workplace pension.
You can deposit up to £20,000 across ISA accounts each tax year. Ms Boyle said: “They are tax-free and allow flexibility. Using ISAs means you can access the money before you are 57 if you are capable of retiring and therefore travelling at this age.”
