The UK has dropped to 18th place in a global retirement ranking for retirement security, declining by one place since last year.

The fifth annual Global Retirement Index by Natixis Asset Management considers 20 drivers of retiree welfare that are grouped into four sub-indices; finances in retirement; health; quality of life; and material wellbeing.

The UK’s decline can be explained by a fall in its health score, which scored 83 per cent a drop of one per cent from 2016. Despite this, material wellbeing remained the same and there were improvements in finances in retirement and quality of life. However, finances in retirement, which considers interest rates, inflation, tax pressure, public debt and old-age dependency, is still by far the worst performing indicator for the UK.

The report by Natixis also stated the country’s decline is due in large part to the continuing low-yield environment, exacerbated by uncertainty over the UK’s future and implications of Brexit. Commenting, Natixis Global Asset Management executive director of the global research centre Dave Goodsell said retirement security has become a pressing issue across the developed world.

“Demographic shifts towards an older population and ever expanding lifespans challenge the abilities of public and private institutions to meet the needs of a rapidly growing number of retirees worldwide. Traditional retirement funding models and support systems will need to be adapted to address these new realities.”

This is the second year in a row in which the UK scores at the very bottom of countries surveyed on the interest rates indicator as low rates erode retiree savings. It is only two spots away from being in the bottom ten on overall government indebtedness. In governance and bank non-performing loans, the country performs relatively strongly.

“In the UK, macroeconomic factors will continue to heavily impact retirees in light of Brexit related uncertainty and the economic adjustments that are taking place as result,” Natixis Global Asset Management chief international operations officer Chris Jackson said.

“Any potential interest rate rise would have a positive impact on retirees’ ability to generate an income from their savings – however as the UK’s future remains uncertain, the likelihood of an interest rate rise is unlikely.”

With a decreasing number of DB pensions in the UK still accepting new employees, the analysis suggests that the most effective solution to widening access to retirement benefits is sharing responsibility between government, employers and individuals.

“The introduction of auto-enrolment has been a big step forward,” said Jackson. “But it will be crucial to find ways to encourage employees to increase their contributions over time. This is the only way to avoid a serious retirement crisis in future years. Those entering the workforce now may need to work well into their seventies before being eligible for a pension.”

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