I know that the state of the UK’s retirement situation may seem quite gloomy at times but it’s not all bad news (at least not entirely).
This year’s Natixis Global Retirement Index (GRI) saw the country moving up a place in the global retirement ranking and by some standards, we are seeing general improvements with regards to aspects like health and wellbeing. All this is well and good. However, performance when it comes to prospects for retirement have, in general, slumped and this has dragged the overall accumulated figure down.
Still, the results of the sixth annual study conducted by Natixis Investment Managers and CoreData Research, show that the UK has risen up to rank 17th overall in 2018, which brings it up one place from last year. The score in percentage was 73% and is stated to have been driven up by tremendous improvements in well-being, quality of life and health.
This might not come as a big surprise to some of us (or at least those of us who follow the news) but, despite positive developments, the nation witnessed stunted performance growth in the study’s finances in retirement sub-index - which measures how sound a country’s financial system is, as well as how conducive it is to the preservation of savings and the maximisation of income retirees. The UK ranked 32 in this.
This same Global Retirement Index had assessed 43 different countries based on factors that drive retirement security as well as material wellbeing, quality of life, health and finances in retirement, utilising around 18 indicators such as life expectancy, income per capita, old-age dependency, inflation and real interest rates in order to calculate a mean score within each category. These results were then combined to find an overall ranking among all participating nations.
On the other hand, the finances at retirement section were based on seven separate factors, which included old-age dependency, inflation, bank non-performing loans, interest rates, tax pressure, government indebtedness and governance.
Taking a closer look at the survey, areas that contributed to the UK’s “particularly low” scores were old-age dependency at 35%, government indebtedness (31%) as well as favourability of interest rates at 1%.
So what were the main reasons that the UK’s retirement prospects lagged behind its developed market counterparts? As can be seen in the report, an impact of low-interest rates and higher levels of government indebtedness wasn’t doing the current condition of the nation any favours, putting a strain on its people’s savings and overall financial stability.
It also comes as no surprise that Nordic countries continued to remain pinnacles of effectiveness with optimal performance driven by better income equality, a generous social system and generally good economic performance.
15 of the top 25 countries that made the list were all in Western Europe. Switzerland managed to grab the first spot due to improvements in health, quality of life and finances, knocking Norway into the third position.
Lucas Crasborn, Natixis Investment Managers Head of institutional sales, had this to say about the results: "Of the top 25 countries in the index, over two-thirds saw an improvement or remained consistent when compared to last year, but this shouldn't lead to a sense of complacency.
"The index reveals a number of themes that will continue to impact retirement in the years ahead with rising elderly populations globally; higher life expectancies; rising government debt; inflation; and low-interest rates as the new normal."
He continued, saying that: "The changing demographic is increasing the burden on governments and the shifting market backdrop mean investors need to need to think about how they can diversify their investments to help mitigate the potential impact these changes could have."
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