UK falls in retirement security rankings; global concerns persist amid Covid-19

The UK has fallen one place to rank 18 out of 44 nations in terms of retirement security, according to the Natixis Investment Management 2021 Global Retirement Index, while Iceland maintained its ranking as number one for the second consecutive year.

As reported by our sister title, European Pensions, Switzerland and Norway ranked second and third respectively, followed by Ireland, the Netherlands, New Zealand and Australia, with the top seven holding same positions as last year.

Germany and Canada, meanwhile, have swapped spots, with the former moving to eighth position and the latter moving to tenth, while Denmark remained at ninth overall.

The UK, however, has fallen one place in the ranking to 18 out of the 44 nations included in the index, with its overall country score remaining at 72 per cent.

This lower ranking was attributed to a decline in three sub-indices: quality of life, health and finances in retirement, with the UK ranking seventh, 18th and 29th for these sub-categories, respectively.

Despite the fall in ranking, the UK still has multiple top ten indicators, with water and sanitation ranking first for instance, whilst biodiversity ranked 4th and air quality ranked 10th.

The report also revealed a number of regional highlights, with Western Europe found to the be second highest region with an overall score of 69 per cent, although it was the highest scoring region for both health and quality of life.

Eastern Europe and Central Asia, meanwhile, ranked third as a region at 50 per cent, with four of the bottom 10 countries in Finances included in this region, including Turkey, Hungary, Slovak Republic and Latvia.

Asia Pacific, however, was found to have the lowest overall regional score of 32 per cent, with this region receiving the last or second-to-last score in three out of the four sub-indices.

More broadly, Natixis IM’s report emphasised that 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, warning that retirees are particularly vulnerable to low rates and rising inflation.

It also warned that whilst there is optimism around double-digit returns markets have delivered since the March 2020 Covid downturn, sentiment shows that investors are far less optimistic about achieving retirement security.

In particular, the Natixis Global Survey of Individual Investors showed that seven in 10 people are confident that they will be financially secure in retirement, while 40 per cent of investors expect that “it will take a miracle” to retire securely, with 45 per cent so concerned about retirement they avoid thinking about it altogether.

It also noted that shifts in the pension landscape have compounded this, with eight in 10 individuals surveyed aware that the shift from defined benefit to defined contribution has put increasing responsibility on the individual to fund their retirement.

Furthermore, as a result of the shift to DC, the “vast majority” (80 per cent) said that they would be more inclined to work for a company that offered matching pension contributions, while seven in 10 said that investments that reflect personal values would motivate them to save more.

Commenting on the findings, Natixis IM head of Northern Europe, Andrew Benton, 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 per cent of AUM, is channelled into sustainable or impact investments by 2024.”

Natixis IM’s Global Retirement Index examines 18 performance indicators of retiree welfare in total, grouped into four sub-indices: 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.

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