The ninth annual Natixis Global Retirement Index, which was conducted between March and June 2021 has revealed that the UK has fallen one place in the rankings, down to 18 out of the 44 nations included in the index. Its overall country score remained at 72 percent, with the lower ranking coming as a result of declines in three areas: Quality of Life, Health, and Finances in Retirement, where the UK ranked 7th, 18th and 29th respectively.
Although the UK still ranks in the top half of the rankings for retirement outlook, the latest standings indicate that the quality of life experienced by British pensioners is continuing to worsen, and changes to retirees’ finances such as the scrapping of the state pension triple lock for next year are unlikely to help matters.
But despite a lower overall ranking, the UK does have multiple top ten indicators, with water and sanitation ranking 1st, biodiversity ranking 4th and air quality ranking 10th. The Global Retirement Index (GRI) examines 18 performance indicators of retiree welfare, grouped into four sub-indices that provide insight into which characteristics are driving changes to a country’s retirement outlook.
These four areas are: the material means to live comfortably in retirement; access to quality financial services to help preserve savings, value and maximize income; access to quality health services; and quality of life, including a clean, safe environment to live in.
The Index calculates the relative performance for each nation on each of these criteria, resulting in a composite score that provides a comparative tool for evaluating retirement security globally.
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The top seven countries have maintained the same placement across two consecutive years. Iceland, Switzerland and Norway remain the top three countries, followed by Ireland, the Netherlands, New Zealand and Australia. Meanwhile, Germany and Canada swapped spots with the former moving to eighth and the latter moving to tenth. Denmark remains at ninth overall.
For the third consecutive year, North America has the highest score among all regions at 71.66 percent. North America dominates the overall rankings as a result of having the highest regional score for both the Finances and Material Wellbeing sub-indices and the second-highest score for the Health and Quality of Life sub-indices.
Western Europe places second with an overall score of 69 percent, however it has the highest scores for both the Health and Quality of Life sub-indices. Eastern Europe and Central Asia rank third as a region at 50 percent.
Like Western Europe, it struggles in Finances where it finishes last for the sub-index. Four of the bottom 10 countries in Finances belong to this region, namely Turkey, Hungary, Slovak Republic and Latvia.
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Latin America finishes fourth overall as a region. The region lags in the Material Wellbeing sub-index (21 percent) which significantly holds back its overall performance. Asia Pacific has the lowest overall regional score (32 percent) due to having either the last or second-to-last score in three of the four subindices.
In particular, the low scores for the Health and Quality of Life sub-index are driven by India’s extremely low scores in these two sub-indices. However, a notable exception is Finances, where the region has the second-highest sub-index score.
The risks presented by inflation, interest rates, and public debt, and the financial challenges of employment and healthcare have been exacerbated by the COVID-19 pandemic.
Retirees are particularly vulnerable to low rates and rising inflation both of which impact the ability to generate income during retirement. For many, fixed income investments are a linchpin in their retirement income strategy as investments like bonds tend to provide modest growth, stability, and cash flow.
Low rates and high inflation often require investments in riskier assets to generate returns to preserve savings and provide an adequate income in retirement, but investment risk should decrease over time to prevent fluctuations of capital meaning those nearing or in retirement should have a low-risk investment strategy.
However, low risk investments mean savings could be at risk of being eroded by inflation.
Furthermore, many pension schemes are shifting from defined benefit to defined contribution schemes. Eight in 10 individuals surveyed as part of the Natixis Individual Investor survey launched in June are aware that this shift increasingly puts responsibility on the individual to fund their retirement.
As a result of the transition to defined contribution, the vast majority (80 percent) say they would be more inclined to work for a company that offered matching pension contributions.
They also believe the investments offered in their plan can play a role in spurring retirement savings, as seven in 10 say having access to investments that reflect their personal values would motivate them to save more for retirement.
Andrew Benton, Head of Northern Europe at Natixis Investment Managers said: “We are at an interesting inflection point where the responsibility for a secure retirement is shifting away from employers to individuals. Access to an appropriate retirement savings vehicle combined with incentives to save are critical for individuals, who have ever-increasing responsibility over selecting investment providers for their pensions planning.
“We are focused on developing our range of innovative sustainable solutions to help individuals identify and select investments that can make a real impact and increase their retirement security, aligning with the demand from individual investors that their investments reflect their values.
“To highlight our commitment to this demand, Natixis IM aims to ensure €600bn, equivalent to 50 percent of AUM, is channelled into sustainable or impact investments by 2024.”
Published at Sun, 19 Sep 2021 03:49:00 +0000
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