UK retirement security has declined for the fifth consecutive year, according to Natixis Investment Managers.
According to the Natixis 2022 Global Retirement Index, a multi-dimensional index created to examine the factors that affect retirement security, UK retirement security has dropped one point in the ranking to 19 out of 44 and received a 69 per cent total score, down from 72 per cent in the index for 2021.
The data suggests that 2022 may be one of the worst years to retire because retirees run the risk of not only drawing retirement income from a pool of assets that has already been depleted, but also of having to take bigger risks with their portfolios to make up for lost time.
The UK comes up at 29th overall, 21st in terms of health, 7th in terms of life quality, and 23rd in terms of material well-being for retirees.
Natixis IM head of northern Europe Andrew Benton says: “While inflation has a negative impact on individuals, certain institutions may see an indirect benefit. Pensions generally perform better in inflationary times as central banks implement interest rate hikes to curb inflation. This is because of the seesaw effect that rates have on pension liabilities. In simplest terms: the higher the rate, the lower the liabilities.
“Now with rates increasing, liabilities are shrinking for many. But not all pensions respond in equal measure. The maths on inflation ultimately works out for the better for private pensions. With inflation driving rates up and liabilities down, these managers generally see their contribution rate decline. On the public side of pensions, the maths may not be as advantageous.”
Benton adds: “The challenges that are being faced now and will be faced in the future are clear. Getting retirement right and helping to ensure individuals can live with dignity after their working years is a core sustainability issue for society. Difficult decisions will have to be made as policymakers strive to reconcile balance sheets with commitments to public retirement and healthcare benefits. Success will require a concerted effort from not only policymakers, but employers, the financial services industry, and individuals. It all starts with understanding the risks.”