Global Retirement Index: retiree income affected by a weak macroeconomic environment

France loses 3 places in the world rankings of retirement security, according to the 2015 Global Retirement Index published today by Natixis Global Asset Management. The Global Retirement Index is a worldwide benchmark comparison based on how retiree’s needs are being met in 150 different countries. The findings overall suggest that retirement security is uncertain for most retirees given unsustainable demand for government resources and macroeconomic factors that affect the value of retiree savings, placing more responsibility on individual investors for their own welfare in retirement.

“Individuals will always be subject to sweeping political and economic events, but this doesn’t mean they should stay passive; they have a key role to play” said Christophe Point, Director NGAM Distribution, France, French-speaking Switzerland and Monaco. “In France, individuals have invested a large share of their savings in fixed rate or capital guaranteed assets, but yields are expected to weaken year after year. Our role is to help investors recognise that reality, but more importantly, help them understand the need to act so that they can ensure their retirement security when the time comes”.

Most investors will need help to achieve retirement security. A worldwide survey by Natixis Global AM* found that 68 percent of investors didn’t have a financial plan and only 16 percent said they had a clear idea of the annual income they’ll need to maintain their standard of living in retirement. In France, the findings also give cause for concern: 70% of the survey respondents said they did not have clear financial goals and 79% have not set up a financial plan with a view to achieving these objectives.

Individuals should focus on factors within their control, such as financial planning, setting goals and being more engaged with their finances.

The index ranks 150 nations on 20 trends across four broad categories: health and healthcare quality; material well-being in retirement; quality of life; and finances in retirement. Together, these trends provide a measure of the life conditions and well-being expected by retirees and near-retirees in each country.

European nations continue to enjoy the greatest financial security in retirement, taking eight of the top 10 places, with Switzerland and Norway leading the way for the second consecutive year.  No. 3 Australia and New Zealand (No. 10) were the only non-European countries among the top 10.

The biggest movers in 2015 were Japan, Qatar and Kuwait, each moving up more than 10 places in the ranking, with Japan moving from 27th to 17th due to improvements in its health ranking, Qatar moving from 31st to 21st and Kuwait moving from 40th to 26^th. The two countries have experienced rapid growth, enjoy the world’s first and second highest income per capita, and their unemployment rates are under 1.5%. Qatar has seen the quality of healthcare available to its retirees improve substantially over the past few years. Conversely, Greece slipped down 37 spots to 76th and Spain dropped 26 places to 55th. 

Countries where retirement security is least secure are predominantly developing parts of the Sub-Saharan, Middle Eastern and Southeast Asian nations.

Top-ranked countries face fiscal challenges, ageing populations

The leading nations typically have growing economies; strong financial systems and regulations; public policies that provide broad access to healthcare and other social services; and substantial public investment in infrastructure and technology. For workers, they provide mandatory or quasi-mandatory retirement savings programs.

As developed economies, these nations also face challenges. More of their citizens are reaching retirement age, and a high percentage of them are living decades beyond. At the same time, there are fewer working-age people to support the social programs retirees have relied on. Since many of these nations already impose high taxes and their governments carry a heavy debt burden, the long-term viability of their retirement programs could be at risk.

 “Ideally, a secure retirement involves the commitment of governments, employers and individual citizens,” adds Christophe Point. “If governments’ capacity to provide its share of the well-being of retirees is limited or compromised, the responsibility will fall elsewhere. Individual workers, savers and investors will be expected to assume more of that task for themselves. That is why we encourage investors to base their investment strategies on personal benchmarks, or individual long-term investment targets.”

France’s position in the ranking

France has remained relatively stable in the ranking, moving from 15th position in 2014 to 18^th this year.

France ranks between Japan in 17th position and the United-States in 19th. This slight drop in the ranking is due primarly to a rising tax burden, high public debt, an ageing population, rising unemployment and low interest rates. However 2015 should see a modest economic recovery as the country’s GDP shows signs of weak growth. But whether this will have a positive impact on unemployment remains to be seen - unemployment grew from 9.3% to 9.9% in 2014. Inflation was already dangerously low before oil prices started to tumble, a trend that should bring prices even lower. This could turn out to be a double-edged sword, helpful to consumers in the near-term but risky for the country’s economy. Nevertheless, France has held on to its high ratings for the Health index thanks to a rising life expectancy (up from 81.5 to 82.5 years) and an efficient social security system that is advantageous to retirees (92.6% of their health expenses are covered).

Top 30 countries in Natixis Global AM’s Global Retirement Index Survey:

February 2015

For a more detailed overview of the Natixis Global Retirement Index, including the rankings of all 150 nations evaluated, go to www.durableportfolios.com.

*Natixis Global Asset Management released its Global Survey of Individual Investors in May of 2014.  Natixis’ 2014 Individual Investor Research

study is based on fieldwork conducted by Coredata  in 14 countries throughout the Americas, Europe, Asia and the Middle East with 5,950 investors

 having assets of 200K+ (USD).