- Iceland, Switzerland and Norway continue to lead overall Index, while Ireland soars to No. 4 spot.
- Canada moves up one spot since last year. Despite improvements in employment and income equality, Canadians are less happy.
- Developed countries are vulnerable to demographic headwinds as the number of retiring workers exceeds those entering the workforce.
BOSTON–(BUSINESS WIRE)–Canada rose one spot to No. 8 among developed nations on the 2019 Global Retirement Index, released today by Natixis Investment Managers. The annual index, a snapshot of the wellbeing and financial security of retirees in 44 countries, found Canada ranked higher in the finances and material wellbeing sub-indices, decreased in quality of life and held steady in health. The analysis by Natixis also identifies three global risks – low interest rates, longer lifespans and the high cost of climate change – that are weighing on retirees, policymakers and long-term global sustainability.
“Meeting the needs of today’s retirees while preserving retirement security for future generations continues to be one of the most pressing challenges for economies around the globe,” said Jean Raby, CEO at Natixis Investment Managers. “We created the Natixis Global Retirement Index to help facilitate a candid conversation about what steps need to be taken to ensure retirement security on a global scale.”
Now in its seventh year, the Natixis Global Retirement Index examines 18 factors which influence retiree welfare in the areas of finances in retirement, material wellbeing, health and quality of life. The Index calculates the relative performance for each of the 44 countries on each of these criteria, resulting in a composite score that provides a comparative tool for evaluating retirement security globally.
Highlights of the 2019 Global Retirement Index include:
- Western Europe continues to lead as a region, with 15 countries finishing in the top 25 for the third year in a row. The Nordic countries maintain their strong performance in the top 10, including Iceland (No. 1), Norway (No. 3), Sweden (No. 6) and Denmark (No. 7).
- Ireland advanced to No. 4 from No. 14 two years ago due to an improved score in the Health sub-index, where it moves into the top 10 (from 19th), driven primarily by the country’s higher per capita health spending. The country also performed well in Finances, powered by improvements in bank nonperforming loans and government indebtedness.
- Japan, which ranks No. 23, stands out for having the lowest score among GRI countries for old-age dependency, a measure of the number of active workers compared to the number of retirees. Japan has the highest life expectancy, but also one of the lowest fertility rates among developed countries. Despite having the highest score for employment in the Index, Japan has a small proportion of working-age individuals supporting those in retirement. This reflects a broader trend affecting many developed economies.
Factors affecting the Canadian GRI ranking
Canada saw its overall score improve on the back of better performances in both the Material Wellbeing (21st from 22nd) and Health (held steady at 8th) sub-indices compared to last year. The country scored lower in Quality of Life (13th from 9th) and Finances (7th from 8th). The following are notable factors affecting Canada’s position:
- Robust finances, but growing pressure on government resources: Canada maintains its position in the top 10 in the finance category. The country marked gains in both the non-performing bank loans and governance indicators. However, its position is threatened by a growing ratio of retirees to active workers (old-age dependency), an ongoing trend that puts increasing pressure on government services over time. Lower scores for tax pressure and interest rates1 also put its performance at risk.
- Rising employment and economic opportunity: Higher scores for employment and improvements in income equality lift Canada’s Material Wellbeing sub-index score. The income per capita indicator (level of income per person) experienced a slight decline.
- Good grades in health: Canada’s Health sub-index held steady, with improvements to all three indicators, including life expectancy, health expenditure per capita and insured health expenditure, which measures the proportion of healthcare expenses covered by insurance.
- Quality of life: Lower scores for environmental factors and the happiness indicator, which evaluates the quality of retirees’ current lives, weighed on Canada’s Quality of Life performance. However, a top 10 finish in the air quality indicator (2nd) is an encouraging sign.
Three pressing risks for retirement security
The Natixis report, “Global Security. Personal Risks,” supplements the 2019 Index and illustrates three pressing risks and their implications for retirees and future generations globally. The analysis serves to encourage dialogue among policymakers, employers and individuals to understand the impact and help manage the risks to society.
- Interest rates: Interest rates do not appear to be rising anytime soon, and the related low yields on investments present hurdles for those looking to generate income in retirement. As a result, retirees may be forced to invest in higher-risk assets, thus exposing their portfolios to greater volatility at an age when they might not have time to recoup losses due to a market downturn.
- Demographics: Longevity represents a key risk for retirees. According to the United Nations, the impact of aging populations is greatest in developed countries. The most telling point of this trend came in 2018 when, for the first time in history, the number of people aged 65 and older outnumbered children under the age of five.2 It looks to only increase with time as, by 2050, old-age dependency in the developed world is expected to reach 46.40 and, by 2070, 49.54.3 This leaves policymakers with hard choices on how to address the funding crunch.
- Financial and health impacts of climate change: The risk of climate change is often viewed through a long-term lens, but it poses tangible health and financial risks to today’s retirees. The costs associated with natural disasters help force up insurance rates and consume government resources. Munich Reinsurance Company reports that severe events helped make 2018 the fourth-costliest year for insured losses since 1980.4 Similarly, extreme heat has increased the risk of illness among older adults, particularly those with chronic illnesses, according to the US Environmental Protection Agency.5
“Retirement security is a complex, multidimensional issue and there will be no single solution to the problem of ensuring that, after a life of work, individuals can live with dignity in retirement,” said Dave Goodsell, Executive Director of the Natixis Center for Investor Insight. “With the 2019 Global Retirement Index, it is our goal to initiate a dialogue with policy makers, employers, individuals, and the financial industry about how to best address the needs of retirees for generations to come.”
To download a copy of the Global Retirement Index, visit im.natixis.com/us/research/2019-global-retirement-index.
The Global Retirement Index assesses factors that drive retirement security across 44 countries where retirement is a pressing social and economic issue. It was compiled by Natixis Investment Managers with support from CoreData Research. The index includes International Monetary Fund (IMF) advanced economies, members of the Organization for Economic Cooperation and Development (OECD) and the BRIC countries (Brazil, Russia, India and China). The researchers calculated a mean score in each category and combined the category scores for a final overall ranking of the 44 nations studied.
About the Natixis Investment Institute
The Natixis Investment Institute applies Active Thinking® to critical issues shaping the investment landscape. A global effort, the Institute combines expertise in the areas of investor sentiment, macroeconomics, and portfolio construction within Natixis Investment Managers, along with the unique perspectives of our affiliated investment managers and experts outside the greater Natixis organization. Our goal is to fuel a more substantive discussion of issues with a 360° view of markets and insightful analysis of investment trends.
About Natixis Investment Managers
Natixis Investment Managers serves financial professionals with more insightful ways to construct portfolios. Powered by the expertise of more than 20 specialized investment managers globally, we apply Active Thinking® to deliver proactive solutions that help clients pursue better outcomes in all markets. Natixis Investment Managers ranks among the world’s largest asset management firms6 with more than $1 trillion assets under management7 (€898.2 billion).
Headquartered in Paris and Boston, Natixis Investment Managers is a subsidiary of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Investment Managers’ affiliated investment management firms include AEW; Alliance Entreprendre; AlphaSimplex Group; Darius Capital Partners; DNCA Investments;8 Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; H2O Asset Management; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners;9 Vaughan Nelson Investment Management; Vega Investment Managers;10 and WCM Investment Management. Investment solutions are also offered through Natixis Advisors and Dynamic Solutions. Not all offerings available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers. Twitter: @NatixisIM
Natixis Investment Managers’ distribution and service groups include Natixis Distribution, L.P., a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, and Natixis Investment Managers S.A. (Luxembourg) and its affiliated distribution entities in Europe and Asia.
1 Data Source: World Bank WDI 2019, OECD, based on the latest data available (2013 to 2017)
2 United Nations. World Population Prospects 2019. Statista. https://population.un.org/wpp/
3 United Nations. World Population Prospects 2019. Statista. https://population.un.org/wpp/
4 Munich Re: munichre.com/topics-online/en/climate-change-and-natural-disasters/natural-disasters/the-natural-disasters-of-2018-in-figures.html
5 EPA’s Climate Change and Extreme Heat Report
6 Cerulli Quantitative Update: Global Markets 2019 ranked Natixis Investment Managers as the 17th largest asset manager in the world based on assets under management as of December 31, 2018.
7 Net asset value as of June 30, 2019 is $1.022 billion. Assets under management (“AUM”), as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers.
8 A brand of DNCA Finance.
9 Not yet licensed – currently pending authorization process as a portfolio management company with the French Autorité des marchés financiers (the “AMF”).
10 A wholly-owned subsidiary of Natixis Wealth Management.
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