A new report into welfare in retirement around the world has highlighted a number of issues posing a risk to pensioners’ security, with its authors warning these risks are growing this year.
In the report around the publication of Natixis Investment Managers’ latest annual Global Retirement Index (GRI), the firm’s chief executive officer Jean Raby acknowledged that in the current climate, retirement security may not be top of the list of current global concerns.
“In reality, though, the crises we are experiencing today will have long-range implications for global retirement security and the impact will likely be felt for decades to come.”
He said: “It will take a coordinated effort from policy makers, businesses and individuals to address the challenge of ensuring people can retire secure in the knowledge they have adequate financial resources after a lifetime of work.”
This year’s report, which centres around an annual ranking of countries for the security they offer retired people, highlighted five main factors now posing significant risks to retirement security – recession, falling interest rates, rising public debt, increasing climate-related natural disasters and persisting income inequality.
Relatively short-term obstacles could culminate in longer-term issues, Natixis said, with slow global growth and high unemployment meaning retirement plan contributions and payroll taxes earmarked for public pensions were dramatically reduced.
It also said interest rates had been at historic lows for over 12 years now, and the global shutdown was forcing further cuts. Given this, the firm said pension managers would “need to think creatively” about how to manage long-term liabilities.
On the issue of rising public debt, Natixis said that because public spending on stimulus and aid had been essential to keep economies afloat, policy makers faced tough choices regarding the needs of retirees in the future.
Natixis also said the increased frequency of climate-related natural disasters in recent years was leaving vulnerable retirees exposed to higher levels of physical and financial risk.
“Asset managers, among others, have to work alongside policy makers, employers and individuals to meet the challenge of ensuring a secure retirement for individuals around the globe,” Raby said.
Iceland topped the GRI ranking again this year as the best country for retirement security, following its win last year, with Switzerland placed second and Norway third – an unchanged podium from last year’s index.
Ireland also remained in fourth position, but Sweden was knocked out of the top 10 entirely, dropping to 11th and being replaced in its former fifth position by the Netherlands.
Even though Sweden ranked fourth for quality of life and seventh for health in the GRI, Natixis said the Nordic country had dropped to 17th from 15th for material wellbeing and to 30th from 22nd in the finances category.