2019 Global Retirement Index
Global Security. Personal Risks.
By Dave Goodsell
From uncertain economics to aging demographics to climate change, global retirement security faces a wide range of modern risks. These issues have sweeping implications for a sustainable society. But, while they need to evaluate from both global and national perspectives, the ultimate risks to retirement security actually lie closer to home.
Our 2019 Global Retirement Index reveals three key threats to retirement security – interest rates, demographics, and climate change – as well as what they mean for individuals and institutions.
Top 10 Countries for Retirement Security
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Luxembourg moves up one spot from 11th last year to break into the top ten, replacing the Netherlands, bolstered by higher relative scores in Quality of Life and Material Wellbeing sub-indices.
- Best of class finishes for insured health expenditure (2nd) and health expenditure per capita (3rd)
- Better scores in the environmental factors and happiness indicators compared to 2018
- Improvements in the employment indicator offset lower scores in income equality and income per capita
Australia slides three places to ninth overall this year. While Australia improved in both the Health (11th) and Material Wellbeing (24th) sub-indices, lower scores in Quality of Life (15th) and Finances (4th) pushed down the country’s overall performance.
- Highest score among all countries for air quality
- Top ten scores for interest rates and bank non-performing loans
- Better finishes in both health expenditure per capita and insurance health expenditure lift Health sub-index score
- Weaker performances in happiness and environmental factors indicators
Canada moves up one spot in to finish eighth overall after breaking into the top 10 in 2018. Its improved score is due to gains in the Material Wellbeing and Health sub-indices.
- Higher scores for employment and income equality
- Impressive gains in the bank nonperforming loans and governance indicators, earning the highest score and seventh-highest scores, respectively
- Top 10 finishes in air quality and happiness indicators
Denmark nudges up one spot to 7th overall, fueled by better scores in Material Wellbeing and Finances.The country boasts the highest score among all countries for the Quality of Life sub-index.
- Better score for the employment indicator
- Improvements in bank nonperforming loans, interest rates and government indebtedness indicators
- Top 10 scores for happiness, air quality, environmental factors and biodiversity
Sweden drops two places in the rankings to sixth overall. It has lower scores in Finances, Quality of Life and Health sub-indices compared to last year but a higher score in Material Wellbeing. A main contributor to Sweden’s lower overall score is declines in two Quality of Life indicators.
- Environmental factors and happiness scores, while still in the top 10, decline from last year
- Slight improvements in health expenditure per capita and life expectancy, but not enough to offset a lower score for life expectancy
- Higher score for the employment indicator but lower scores for both income equality and income per capita
For the third year in a row, New Zealand finishes 5th. The country finishes in the top 10 in both the Finances and Quality of Life sub-indices, but its overall score slips slightly from last year due to lower scores in all four sub-indices.
- 2nd overall in Finance, with top 10 finishes in the governance, bank nonperforming loans and government indebtedness indicators
- Top 10 finishes in air quality, happiness and environmental factors
- Weaker scores for both health expenditure per capita and insured health expenditure indicators
Ireland jumps three spot to fourth overall after breaking into the Top 10 last year. Improvements in the Health and Finances sub-indices boosts its overall score. Material Wellbeing is Ireland’s only sub-index not ranking in the top 10.
- Higher scores for bank nonperforming loans and government indebtedness, and a top 10 finish for the tax pressure indicator
- Slightly lower scores for environmental factors and happiness are balances by a top 10 finish in the air quality indicator
- Ireland climbs to fifth overall in the income per capita indicator
Norway remains third place overall with a slightly lower score than last year. Norway improves its score in the Health sub-index by being the only country in the GRI to achieve a top 10 finish in all three indicators. The country registered score declines in the Quality of Life, Material Wellbeing and Finances sub-indices.
- Top 10 finishes in happiness, environmental factors and air quality indicators
- Lower scores for the income equality and income per capita indicators, balanced by an improvement in the employment indicator
- Improvements in life expectancy and insured health expenditure indicators
Switzerland drops one spot from last year to second overall. It has the distinction of being the only country in the GRI with top 10 finishes in all four sub-indices, while lower scores in three sub-indices contributed to its decline in overall score.
- Highest score for the environmental factors indicator
- Top 10 for governance and bank nonperforming loans, while score for the tax pressure, old-age dependency and governance indicators drop
- Second place finish in both the life expectancy and health expenditure per capita indicators
Iceland continued its rise in the rankings topping the GRI, up one spot from last year. While registering a lower overall score than last year, it grabs the top spot because Switzerland, last year’s winner, registered a larger score decline. The country improved its scores in both the Finance and Health sub-indices, while lower scores in Material Wellbeing and Quality of Life contribute to the country’s lower overall score.
- Top 10 finishes in the happiness, environmental factors and air quality indicators
- Iceland breaks into the top 10 in the Finances sub-index, with all indicators except for tax pressure and old-age dependency improving
- Strides made in health expenditure per capita and insured health expenditure indicators
Download Slideshow for an in-depth look at the top 10 countries for retirement security.
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What is the
Global Retirement Index?
The Global Retirement Index (GRI) is a multi-dimensional index developed by Natixis Investment Managers and CoreData Research to examine the factors that drive retirement security and to provide a comparison tool for best practices in retirement policy.
The GRI 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). We’ve calculated a mean score for each category and combined the category scores for a final overall ranking of the 44 nations studied.
3 critical threats to global retirement security
Retirement policy makers, pension and plan sponsors, and individuals around the globe face significant risks – from the viability of providing retirement benefits to the financial risks individuals are forced to assume in retirement saving and the ability of public and private institutions to deliver benefits over the long term. The 2019 Global Retirement Index reveals three critical threats.
Low rates may stimulate borrowing, but they also present a significant hurdle for those saving for retirement and those looking to generate income. Individual investors also expect a hefty 11.7% average return from their investments.1 Institutional investors say 6.7% is more realistic.2
What do we need from stocks to achieve return expectations?
|Individual Investors’ Return Expectations|
|Stocks||Bonds||Equity return to reach 11.7%|
Source: Natixis Investment Strategies Group; based on assumed bond return of 2.52% (Bloomberg Barclays US Aggregate Bond Index as of July 2019)
Performance data shown is based on past performance and is no guarantee of, and not necessarily indicative of, future results.
Rapidly aging populations pose one of the biggest risks to pension planning, but longevity also represents a key risk for retirees. Old-age dependency is a critical factor for retirement security.
Old-age dependency is the ratio of people over the age of 65 to the working-age population, age 15–65. It illustrates how many people are putting money into the system, compared to the number likely to take money out. Why does old-age dependency matter? For example, it raises key questions about pensions. Will institutions be able to pay out pensions? Will retirees find that their pensions are cut because they’re underfunded? Old-age dependency can also have implications for policy, taxes, and retirement benefits.
And this may be most important for Generation Z. UN projections show that individuals in developed regions who reach age 65 in 2015 will live an average of 19 more years.3 By 2065, Generation Z retirees should plan for living another 24 years in retirement and current systems will be challenged to keep up.
Things will look very different for
When they were born
When they'll retire
Source: United Nations. World Population Prospects 2019. Statista. https://population.un.org/wpp/
A long-term risk to global sustainability presents an immediate financial risk today. While the risk of climate change is often viewed through a long-term lens, today it presents tangible health and financial risks to millions of retirees that will challenge policy makers around the world.
The realities of retiring to the beach
While retiring to the beach can be idyllic, the consequences of climate change mean retirees may also face some very real – and daunting – financial challenges. These risks not only affect individuals, as climate change can have costly impacts for policy makers as well.
How does climate change impact the cost of healthcare?
How could rising sea levels affect commercial and residential assets?
Can the existing coastal infrastructure survive intense storm damage?
additional deaths per year between 2030 and 2050 due to climate change – household air and ambient air pollution cause 4.3 and 3 million deaths per year, respectively4
in losses from natural catastrophes in 2018 – people in low and average income brackets may no longer be able to afford property insurance premiums5
of the world’s population (2.4 billion people) live within 100km of the coast6
in direct damage costs (i.e. excluding costs in health-determining sectors such as agriculture and water and sanitation) to health by 20307
in commercial, industrial, road, rail and residential assets will be at risk from sea level rise alone by 2100 if greenhouse gas emissions continue at high levels8
given to US state and local governments to rebuild public infrastructure between 2005 and 2014 by the Federal Emergency Management Agency’s public assistance program9
Get more insight into these key threats, as well as detail on the how and why of country rankings.
2 Natixis Investment Managers Global Survey of Institutional Investors, conducted by CoreData Research October-November 2018. Survey included 500 respondents in 28 countries.
3 United Nations. World Population Prospects 2019. Statista. https://population.un.org/wpp/
4 World Health Organization. Climate change and health. (2018). https://www.who.int/news-room/fact-sheets/detail/climate-change-and-health
5 Nelson, Arthur. “Climate change could make insurance too expensive for most people – report.” The Guardian, March 21, 2019. https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-insurance-too-expensive-for-ordinary-people-report
6 United Nations. The Ocean Conference Fact Sheet: People and Oceans. (2017). https://www.un.org/sustainabledevelopment/wp-content/uploads/2017/05/Ocean-fact-sheet-package.pdf
7 World Health Organization. Climate change and health. (2018). https://www.who.int/news-room/fact-sheets/detail/climate-change-and-health
8 “Compound Costs: How Climate Change Is Damaging Australia’s Economy.” Climate Council of Australia. Updated May 14, 2019. https://www.climatecouncil.org.au/wp-content/uploads/2019/05/costs-of-climate-change-report-v3.pdf
9 “What We Don't Know About State Spending on Natural Disasters Could Cost Us.” Pew Trusts, June 19, 2018. https://www.pewtrusts.org/en/research-and-analysis/reports/2018/06/19/what-we-dont-know-about-state-spending-on-natural-disasters-could-cost-us
The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.
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