Many pension savers look forward to retiring and having plenty of time to take holidays.
When you stop working, you can – in theory – go travelling whenever you like, no longer constrained by requesting annual leave from your employer.
However, holidays cost money, and the type of break and destination choice will depend on the size of your pension pot and any other income sources.
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So, what sort of holiday will your pension stretch to in retirement?
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Pensions UK has attempted to answer this question by looking at the holidays that three different retirement lifestyles could afford, from UK city breaks and European week-long trips to cruises and all-inclusive holidays.
The industry body regularly calculates the annual income a pensioner needs to have to achieve a “minimum”, “moderate” or “comfortable” retirement.
Known as the Retirement Living Standards, they take into account food, clothing and leisure costs – including theatre trips and TV streaming packages – as well as transport and DIY expenses. They are designed to help prepare people for life after work.
Pensions UK has now detailed the kinds of holidays pensioners can enjoy each year, according to these three lifestyles.
Cali Sullivan at Pensions UK comments: “When people picture retirement, they often imagine relaxing in the sun, exploring new places, or simply taking a well-earned break from the everyday. But many worry about whether they can actually afford to get away.
“The good news? Retirement doesn’t have to mean giving up on travel. Whether you're aiming for the minimum, moderate or comfortable level, there’s a budget for all retirement levels, meaning getting away is still very much on the cards.”
Minimum retirement
Single retiree: £13,400 annual income (£20,000 to £35,000 pension pot required)
Couple: £21,600 combined annual income (no pension pot required)
The figures above assume the retirees receive the full new state pension. This is worth £11,975 a year. So, if a couple both received this amount, they would get £23,950 in total.
This is more than enough to deliver the minimum standard of retirement, which costs £21,600 for a couple, according to Pensions UK.
In contrast, a single pensioner would need to find some extra income to deliver a minimum retirement lifestyle. The industry body estimates that a pension pot worth between £20,000 and £35,000 could buy an annuity to top up their income to £13,400.
Sullivan points out that about three-quarters of households are expected to achieve a minimum standard in retirement, and two-person households, who can share living and travel costs, are even more likely to do so. This is due to the generous state pension, and the fact many people are auto-enrolled into workplace pensions.
While it wouldn’t be possible to holiday abroad every year on a “minimum” budget, Sullivan says retirees can look forward to a welcome break each year – “a change of scenery is possible”.
She comments: “A week away in the UK is within the budgeted costs, with plenty of inviting destinations to choose from – whether it’s the coast of Devon, the hills of Yorkshire, the lochs and glens of Scotland, or the charm of Norfolk or Wales.”
Pensions UK says retirees could afford seven nights in a Norfolk caravan park with access to a swimming pool, entertainment and a range of paid activities. A generous £720 budget would be available during the trip for food, meals out and visiting attractions like a Sea Life Aquarium and National Trust properties.
Moderate retirement
Single retiree: £31,700 annual income (£330,000 to £490,000 pension pot required)
Couple: £43,900 combined annual income (£165,000 to £250,000 pension pot per person required)
There are more travel options open to retirees with a bit more flexibility in their budget. To achieve a “moderate” lifestyle, single retirees will need to save at least £330,000 in workplace or personal pensions (on top of the full state pension).
Couples will need pension pots worth at least £165,000 per person.
“Picture two weeks soaking up the sun in Tenerife, Mallorca, Turkey, Rhodes or Spain, all-inclusive. You can also look forward to a three-night city break in a UK gem like Bath, York, Glasgow, Manchester or Cambridge,” comments Sullivan.
“There’s no one-size-fits-all approach either. Some people prefer a couple of shorter trips. Others go for one big splash. Think of it as a ‘pick and mix’ retirement and tailor your holidays to suit your style, mood and budget.”
For example, you could spend a fortnight in an all-inclusive three-star Mallorca resort, costing £1,073 per person plus £200 spending money per person, as well as a three-night city break in Bath, costing £346 with £350 spending money.
Comfortable retirement
Single retiree: £43,900 annual income (£540,000 to £800,000 pension pot required)
Couple: £60,600 combined annual income (£300,000 to £460,000 pension pot per person required)
To achieve a comfortable standard of retirement, you’ll need big pension pots worth at least £540,000 for a single retiree, and £300,000 each if you’re in a couple.
“With a comfortable retirement income, you can expect more freedom to travel further afield and have a longer trip. You could set sail on a two-week cruise to the Mediterranean, or a 12-night all-inclusive cruise around the Norwegian Fjords,” suggests Sullivan.
For example, a 12-night all-inclusive P&O Norway and Iceland cruise costs £2,239 per person (cabin with sea view; including classic drinks package), and your budget could stretch to £900 per person in spending money on top.
Sullivan adds: “Prefer dry land? Lake Garda or a suite in Mallorca might be more your speed. Or if you are looking for variety, you could even split your time on the sea and land.”
As well as two weeks abroad, this level also includes some sightseeing weekends, with three long weekends in the UK included, such as to Bath, York or Cambridge.
How holidays can motivate you to save more for retirement
Most people are not saving enough for their retirement. Last month, the government revived the Pensions Commission to tackle the retirement savings crisis.
It warned that people retiring in 2050 are on track to be poorer than pensioners today, and said that 45% of working-age adults do not save into a pension.
According to Lisa Picardo, chief business officer at PensionBee, “framing retirement planning around lifestyle goals can be a powerful motivator to save”.
She tells MoneyWeek: “For many savers, retirement offers more time to tick new experiences off their bucket lists, and domestic breaks or trips overseas may be a key part of that.
“Thinking about the types of trips you want to take and the activities you want to pursue in later life can help make the idea of saving feel more tangible and rewarding. The earlier you start planning, the more flexibility and choice you will have when the time comes to enjoy the retirement you have worked hard for.”
According to Pensions UK, a couple looking to have enough financial flexibility to afford an annual two-week trip abroad in retirement would need a combined annual income of £43,900.
But, Sullivan says it’s important to note that retirees on smaller incomes can still relax and enjoy a holiday, even if it’s not overseas. And there are holidays to suit every budget.
“We know many people face tough choices due to rising costs, both before and during retirement,” she comments.
“By taking time now to understand your savings, making the most of employer contributions, and planning for the lifestyle you want, you can give yourself the best chance of enjoying the kind of retirement that suits you, complete with the trips, treats and freedom you have worked hard for.”
