The UK’s ‘retirement security’ has improved, when compared to other countries, according to a global index which rates the wealth and health prospects of the future retired population.
Natixis Investment Manager’s Global Retirement Index (GRI) shows that the UK has climbed two positions in this worldwide league table. It now stands in 14th place, ahead of both France and the United States.
Switzerland is the top performing country when it comes to retirement security, overtaking Norway which has topped this index for the past two years.
Natixis IM says the improvement in the UK’s retirement security has been driven by steady improvement in the health retirement sub-index — a measure of life expectancy and health expenditure.
Contributing to this rise was the UK’s five place improvement in health expenditure per capita — as overall health spending recovered in the years following the global pandemic.
However Natixis IM says that individuals are increasingly feeling the strain of funding their own retirement due to rising unemployment and income inequality.
The UK has performed slightly better on the ‘material wellbeing’ sub-index, but is still outside the top 20 on this measure, and is now ranked 18th when it comes to the ‘finances in retirement’ sub-index — a drop of three places on the previous index.
Overall this GRI is based on four sub-indices, listed below with the UK’s ranking.
- Quality of Life – 11th, same as last index
- Health – 18th, same as last index
- Finances in Retirement – 18th, down three places on last index
- Material Wellbeing – 21st, up one place from previous index
Natixis IM head of Northern Europe and MEACA Andrew Benton says: “The past few years have seen some big shifts that impact our finances and plans for the future: the ongoing transition from defined benefit to defined contribution pensions, rising public debt bills, short term shocks like Covid, and geopolitical tensions firing up inflation, all of which drive anxiety about financial futures for individuals.
“Whilst retirement security has improved in the UK, individuals are increasingly taking their retirement security into their own hands, given the changing market backdrop. In light of this shift, financial services providers need to be more proactive in helping people to save more – to and through retirement – by offering better support and solutions that are tailored to today’s environment and individual retirement needs, including access to both public and private markets if we are to help prevent a retirement crisis down the line.”
This report that accompanied this index identified four key risks facing individuals today:
- Interest rates: While low rates had been a key risk for retirees for the 15+ years following the Global Financial Crisis, today’s higher rate environment presents new risks. Most notably with more than $6 trillion in retail assets invested in money market funds, certificates of deposits and similar instruments, they need to be aware of how today’s cash trap could keep them from meeting their need for a sustainable source of long-term income.
- Inflation: The worst of it may be past as inflation slowly recedes towards central bank targets, but the post pandemic bout of rising prices has served as a stark reminder of just how fast and how severe inflation can be. Now that 83% of investors say recent events reminded them of just how big a threat inflation poses to their retirement security, investors will need to act accordingly to ensure they a prepared for any new episodes down the road.
- Public Debt: Public debt in OECD countries has more than doubled in the first quarter of the 21st Century as policy makers first navigated the Global Financial Crisis and then the Global Pandemic. While the steps were needed to stave off economic meltdown in the short term, policy makers are left with paying down long-term debt. A growing number of individuals are concerned they will be asked to pick up the tab and worry it will result in cuts to the government retirement benefits that are a cornerstone for their retirement income plans.
- Ourselves: A secure retirement is a journey not a destination. Success requires realistic expectations and meaningful commitment from individuals. While many may appreciate this in concept, not every investor sets makes reasonable assumptions and sets realistic goals. Natixis Investor survey results show that investors do not have a consistent vision for what it will take to succeed.