Travel companies are gearing up for the over-55s to spend thousands of pounds of their retirement pots on multi-generational cruises and flights to far-flung destinations as billions of pounds of money tied up in pensions is made available.
Research commissioned on the eve of pension reforms reveals that up to three-quarters of people who are planning to withdraw pension money under the changes being introduced on Monday are considering spending some of it on travel.
Of those with children under the age of 21, a fifth plan to use some of their pension on a family holiday, according to the research from travel and leisure agency Souk, with some expected to pay for not only their children to travel but also their own parents.
“We have already seen a rise in 3G holidays – three generations holidaying together – and we expect this to escalate,” says Richard Downs, who runs cruise ship travel specialists Iglu and Planet Cruise. “At the moment the over-65s might trade down their house to release equity, but these pension changes effectively fast-track this release, allowing people to make such life choices at an earlier age.
He added: “It gives those in their late 50s the chance to pay for their parents to go on holiday – possibly for the last time – and also their children. If they were to leave this another 10 years they might not get the chance.”
Jonny Bealby, founder of Wild Frontiers, a high-end adventure tour operator, said that in the last five years he had seen an increase in the over-50s taking their children back to places they had been to themselves when they were in their 20s and backpacking. “They want to see those places again and to show their children them – and this freeing up of pension money at that stage in life should play into that trend quite substantially.”
As much as £6bn will be released from pension pots in the first four months of the reforms, according to actuaries Hymans Robertson.
The amount of money potentially available to tour operators and cruise ship companies could be so significant that last week the travel industry got together at a round-table event to discuss how to make the most of money made available from the pension changes.
“We’re sitting on top of some quite significant changes in consumer behaviour and I don’t think we should ignore those,” said Richard Carrick, a consultant to the travel industry.
Jo Wilson, marketing manager at Celebrity Cruises, said her company was already considering advertising around the idea of inter-generational travel and that the pensions reforms might provide an additional opportunity to do that. However, the adverts are unlikely to include the word pension. “Any message around pensions money needs to be delivered in a very sensitive way. Nobody wants to be seen as money grabbing,” she said.
However, while cruise companies and more expensive tour operators might be preparing for an increased spend on their trips, it could be the cheaper “fly and flop” holiday operators that benefit the most. Just over half the 55- to 64-year-olds surveyed by Souk only expect to spend between £1,000 and £5,000 from their pension pots, with a further third stating that they plan to spend between £5,000 and £10,000. In both cases the majority expect to spend the money on a resort or hotel stay, with a cruise in second place.
The most committed to spending are those in the lowest income bracket, with 45% of those earning less than £15,000 a year stating that they definitely intend to spend some of their pension on travel plans.