2020 Global Retirement Index
go wrong?
Five critical risks bring retirement
security into focus
by Dave Goodsell
From aging demographics and record levels of public debt to low interest rates and climate-related disasters, global retirement security was on shaky ground at the beginning of 2020. By June, public health, social, economic, and financial risks all reached a boiling point.
The 2020 Global Retirement Index brings five critical risks to retirement security into focus: recession, interest rates, public debt, climate change, and income inequality. Learn more about what they mean for institutions, financial professionals, and individual investors.
Download Slideshow for an in-depth look at this year’s top 10 countries for retirement security.
Ranking
from 1 to 44
Score
Subindices
2020
2019
2018
Health
Quality of Life
Material Wellbeing
Finances in Retirement
Iceland
1
2020
1
2019
1
2018
82%
2020
83%
2019
84%
2018
87%
85%
85%
86%
86%
87%
87%
91%
93%
71%
72%
71%
Switzerland
2
2020
2
2019
2
2018
82%
2020
82%
2019
83%
2018
89%
88%
87%
87%
86%
87%
75%
78%
80%
77%
77%
78%
Norway
3
2020
3
2019
3
2018
80%
2020
80%
2019
80%
2018
91%
90%
90%
88%
88%
90%
88%
86%
87%
59%
59%
60%
Ireland
4
2020
5
2019
7
2018
79%
2020
77%
2019
76%
2018
90%
87%
82%
80%
78%
79%
75%
71%
73%
72%
72%
71%
Netherlands
5
2020
10
2019
8
2018
77%
2020
76%
2019
76%
2018
88%
87%
90%
83%
80%
80%
83%
82%
80%
57%
57%
58%
New Zealand
6
2020
6
2019
5
2018
77%
2020
76%
2019
77%
2018
84%
83%
85%
83%
83%
83%
64%
62%
63%
78%
79%
79%
Australia
7
2020
7
2019
6
2018
76%
2020
76%
2019
76%
2018
87%
85%
85%
77%
77%
79%
65%
66%
66%
77%
77%
78%
Canada
8
2020
8
2019
10
2018
75%
2020
76%
2019
75%
2018
86%
87%
87%
77%
76%
78%
66%
68%
65%
72%
73%
74%
Denmark
9
2020
9
2019
9
2018
74%
2020
76%
2019
76%
2018
86%
85%
85%
87%
87%
88%
75%
75%
74%
53%
60%
59%
Germany
10
2020
13
2019
13
2018
74%
2020
74%
2019
74%
2018
86%
85%
86%
80%
78%
79%
78%
79%
79%
56%
56%
57%
Sweden
11
2020
4
2019
4
2018
74%
2020
77%
2019
78%
2018
89%
88%
89%
87%
86%
87%
69%
72%
71%
56%
65%
67%
Austria
12
2020
14
2019
14
2018
73%
2020
73%
2019
73%
2018
85%
84%
86%
82%
82%
82%
76%
75%
76%
55%
54%
54%
Luxembourg
13
2020
11
2019
12
2018
73%
2020
75%
2019
75%
2018
90%
91%
92%
79%
78%
75%
68%
74%
73%
60%
60%
62%
Czech Republic
14
2020
15
2019
16
2018
73%
2020
72%
2019
72%
2018
73%
72%
72%
68%
67%
66%
83%
83%
82%
67%
69%
69%
Finland
15
2020
12
2019
11
2018
73%
2020
75%
2019
75%
2018
83%
83%
81%
89%
88%
89%
68%
68%
69%
55%
62%
63%
United States
16
2020
18
2019
17
2018
72%
2020
70%
2019
72%
2018
85%
86%
86%
72%
70%
71%
64%
58%
61%
71%
71%
72%
United Kingdom
17
2020
16
2019
15
2018
72%
2020
72%
2019
72%
2018
83%
83%
83%
84%
81%
80%
68%
69%
71%
56%
56%
57%
Israel
18
2020
17
2019
19
2018
71%
2020
71%
2019
70%
2018
80%
79%
76%
72%
71%
72%
65%
66%
63%
68%
70%
71%
Slovenia
19
2020
21
2019
24
2018
71%
2020
69%
2019
68%
2018
80%
79%
79%
67%
63%
60%
77%
72%
69%
62%
65%
65%
Malta
20
2020
19
2019
20
2018
71%
2020
69%
2019
70%
2018
78%
75%
77%
65%
63%
63%
76%
76%
73%
66%
66%
67%
Belgium
21
2020
20
2019
18
2018
70%
2020
69%
2019
71%
2018
85%
83%
83%
76%
74%
75%
73%
73%
71%
51%
51%
59%
Korea, Republic
22
2020
24
2019
21
2018
68%
2020
69%
2019
69%
2018
76%
72%
72%
60%
56%
56%
62%
74%
75%
75%
75%
76%
Japan
23
2020
23
2019
23
2018
68%
2020
69%
2019
69%
2018
91%
90%
88%
67%
64%
64%
70%
72%
75%
49%
55%
55%
Estonia
24
2020
26
2019
27
2018
67%
2020
65%
2019
63%
2018
67%
65%
62%
65%
61%
58%
64%
62%
57%
74%
71%
75%
France
25
2020
22
2019
22
2018
67%
2020
69%
2019
69%
2018
89%
89%
90%
78%
76%
75%
59%
61%
60%
49%
55%
57%
Russian Federation
38
2020
38
2019
38
2018
49%
2020
46%
2019
44%
2018
41%
40%
37%
47%
45%
46%
54%
52%
52%
55%
47%
43%
China
39
2020
39
2019
40
2018
47%
2020
42%
2019
42%
2018
48%
49%
47%
34%
30%
30%
45%
32%
32%
68%
69%
69%
Brazil
43
2020
43
2019
43
2018
36%
2020
36%
2019
36%
2018
54%
55%
54%
61%
57%
57%
8%
10%
9%
58%
56%
55%
India
44
2020
44
2019
44
2018
9%
2020
10%
2019
9%
2018
3%
3%
3%
3%
3%
3%
14%
16%
16%
64%
60%
56%
Singapore
28
2020
30
2019
29
2018
64%
2020
62%
2019
61%
2018
81%
77%
69%
50%
47%
49%
52%
52%
53%
80%
79%
79%
Italy
30
2020
29
2019
28
2018
63%
2020
62%
2019
62%
2018
82%
81%
83%
72%
68%
65%
49%
51%
51%
54%
53%
52%
Spain
32
2020
31
2019
30
2018
60%
2020
62%
2019
60%
2018
82%
81%
81%
74%
71%
71%
35%
40%
36%
62%
63%
64%
Mexico
37
2020
37
2019
37
2018
51%
2020
53%
2019
49%
2018
45%
52%
51%
58%
58%
57%
41%
42%
30%
64%
64%
66%
Colombia
40
2020
42
2019
42
2018
46%
2020
38%
2019
39%
2018
57%
49%
49%
62%
59%
61%
19%
11%
11%
65%
65%
67%
Portugal
26
2020
28
2019
31
2018
65%
2020
62%
2019
60%
2018
76%
75%
75%
66%
60%
54%
58%
55%
51%
61%
61%
61%
Poland
27
2020
27
2019
26
2018
64%
2020
63%
2019
63%
2018
64%
63%
63%
58%
57%
56%
71%
68%
66%
65%
66%
68%
Slovak Republic
29
2020
25
2019
25
2018
63%
2020
65%
2019
64%
2018
65%
64%
65%
64%
61%
61%
73%
68%
64%
53%
67%
68%
Cyprus
31
2020
33
2019
35
2018
62%
2020
59%
2019
55%
2018
66%
65%
62%
65%
60%
56%
60%
52%
49%
59%
59%
53%
Hungary
33
2020
32
2019
32
2018
59%
2020
60%
2019
59%
2018
58%
58%
59%
57%
51%
48%
72%
70%
70%
50%
60%
60%
Chile
34
2020
35
2019
34
2018
58%
2020
55%
2019
56%
2018
68%
66%
64%
62%
63%
64%
37%
29%
30%
76%
76%
78%
Lithuania
35
2020
34
2019
33
2018
57%
2020
58%
2019
57%
2018
58%
53%
55%
62%
60%
57%
52%
51%
50%
55%
68%
69%
Latvia
36
2020
36
2019
36
2018
53%
2020
55%
2019
54%
2018
49%
49%
45%
60%
57%
56%
52%
49%
49%
53%
66%
69%
Greece
41
2020
41
2019
41
2018
41%
2020
39%
2019
39%
2018
70%
70%
70%
60%
52%
52%
15%
14%
14%
45%
45%
46%
Turkey
42
2020
40
2019
39
2018
40%
2020
42%
2019
43%
2018
59%
54%
53%
38%
37%
38%
27%
34%
36%
44%
45%
47%
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.
Methodology Update
The construction of the Quality of Life sub-index in the 2020 GRI has been slightly updated to reflect changes in the data sources. In particular, three indicators – Air Quality, Biodiversity and Habitat, and Water and Sanitation – and the way they are measured are different compared to last year.
For Air Quality, the average annual concentration of PM2.5 has been replaced with the number of years lost due to exposure to PM2.5, exposure to indoor air pollution has been replaced with number of years lost due to exposure to household air pollution, and the percentage of a country’s population exposed to annual concentrations of PM2.5 with number of years lost due to exposure to ground-level ozone pollution. The Water and Sanitation indicator has been updated with a new data source and new definitions: unsafe drinking water compared to access to improved water source and unsafe sanitation compared to improved sanitation facilities in previous years. The data for Biodiversity is relatively similar to last year except for the addition of a new indicator called the Biodiversity Habitat Index.
Since the 2020 GRI scores with these updates would no longer be comparable to 2019 GRI scores, we calculated 2019 scores with the updated data and methodology. As such, the 2018 and 2019 scores and rankings in this year’s GRI report show what the scores would have been with these new calculations and may not necessarily be the same as published in last year’s report.
5 Critical Threats to
Global Retirement Security
Recession: Today’s triple threat
High unemployment means that both retirement plan contributions and payroll taxes earmarked for public pensions are dramatically reduced. Adding to long-term retirement saving challenge, many workers have been forced to take hardship withdrawals from their retirement plans to replace lost income.
In response to the pandemic, 15 countries relaxed regulations
Here’s how that’s playing out for workers in Australia and the US
Australia
What's the rule?
Unemployed or underemployed workers can withdraw up to $10,000 from retirement savings in their Superannuation plans
Who took advantage?
Over 500K workers withdrew $4B+
in the 1st month
By July 7, 24M had withdrawn $25B
Average of $7,500 per person
United States
What's the rule?
Individuals can take penalty-free hardship withdrawals from their defined contribution plans under the CARES Act
Who took advantage?
165,000 took money out in the
month of April alone
Americans withdrew
an average of $5,500
Over 3,000 took out the maximum
amount of $100,000
Sources:
Dhara Singh, Coronavirus cash crunch leading to more Americans withdrawing from 401k accounts, Copyright 2020 by Yahoo Money; Retirement Savings in the Time of COVID, Copyright 2020 by OECD.
Daniel Kemp, AgriInvestor, First wave of superannuation withdrawals in Australia amounts to A$4.4bn, April 24, 2020.
Michael Janda, Australian Broadcasting Corporation, Coronavirus superannuation early withdrawal scheme hits $25 billion as new financial year starts, July 7, 2020.
Interest Rates: How low can they go?
Rates have been at historic lows for 12+ years, but the global shutdown forced even more cuts. Going forward, retirees will need to be resourceful in how they manage income needs, while pension managers will need to get creative about how they’ll manage long-term liabilities.
It’s counterintuitive, but when rates are low, pension liabilities increase substantially. That’s because current interest rates are used to estimate the amount of future payouts.
So, when rates are low, the value of future payouts is greater
What that means for institutions
Multiple pensioners are drawing payments,
with varying life expectancies
Pensions traditionally use
fixed income securities to meet their obligations, but today’s
low-yielding bonds aren’t enough
They’ll need to close the
funding gap with
private investments, infrastructure, and other illiquid assets
But regulations limit
how much they can invest in illiquid assets
What that means for individual retirees
People will have to dip into their
principal faster, so they’ll potentially
expend their pension assets more quickly — and may outlive their savings
Public Debt: The records keep piling up
Public spending on stimulus and aid has been essential to keep the economy afloat, but it also compounds record public debt levels. In the future, debt will present policy makers with difficult decisions about how they address the needs of retirees.
Debt to GDP
as of August 2020
as % of GDP
Rakesh Kochhar, Pew Research, Unemployment rose higher in three months of COVID-19 than it did in two years of the Great Recession, June 11, 2020.
International Monetary Fund, POLICY RESPONSES TO COVID-19. Updated August 28, 2020.
Climate Change: A risk to health and wealth
Climate change poses risks to global retirement security. Environmental changes can greatly affect the health and wellbeing of the elderly and other vulnerable populations. And climate-related disasters can present significant potential financial costs to retirees – including damage to real estate and increases to cost of living.
Head
Dementia
Parkinson’s Disease
Huntington’s Disease
Heart
Accelerated atherosclerosis
Ischemic heart disease
Stroke
Lung
COPD
Lung cancer
Respiratory diseases
Bones
Paget’s Bone Disease
Osteoporosis
Lower Abdomen
Kidney cancer
Digestive system cancers
Infertility
Sources:
World Health Organization, 7 million premature deaths annually linked to air pollution, News release.
Numan, M. S., Brown, J. P., & Michou, L. (2015). Impact of air pollutants on oxidative stress in common autophagy-mediated aging diseases. International journal of environmental research and public health, 12(2), 2289–2305.
Barcelona Institute for Global Health, Air Pollution Can Worsen Bone Health, 3/1/2020.
Income Inequality: Made less equal by retirement
The social justice movement has brought income inequality into focus. Whether the data is examined by race or gender, it demonstrates that a lifetime of lower earning potential adds up to a greater imbalance in retirement savings, funding, and income.
In the US, they’re significantly less likely to be covered by an employer-sponsored retirement plan
Covered by an employer-sponsored retirement plan
of White employees
of Black and Asian employees
of Latino employees
Covered by a pension
of White households
of Black and Asian households
Many people of color have no retirement savings at all
69%
of Latino households
62%
of Black households
37%
of White households
The majority of those who do have retirement savings have set aside less than $10,000
3 out of 4
Black households
4 out of 5
Latino households
The Path Forward
It will take a coordinated global response to address the dire public health challenge posed by the pandemic – and head off a financial crisis. But as critical measures are taken to meet short-term threats, individuals, employers, institutional investors, policy makers, and asset managers will need to recognize the additional challenges presented to global retirement security.
What individuals can do
- Increase focus on how – and how much – they save for retirement.
- Since low rates will likely be with us for a long time, investors should consider saving more to make up for lower earnings.
- Potentially reconsider what retirement looks like. Instead of ceasing to work completely, it may mean transitioning to a new career and different kind of job.
What employers can do
- Help workers meet their savings objectives by making it easier to save with auto-enrollment and matching contributions.
- Offer investments that workers are asking for. For example, 61% of plan participants in the US say they’d be more likely to participate or increase their participation in their company’s retirement plan if they could select investments, like ESG strategies, that match their personal values (Natixis Investment Managers 2019 Survey of Defined Contribution Plan Participants).
What institutional investors can do
- Workplace pensions are less common than 20–30 years ago, but pension managers still play a critical role in ensuring global retirement security.
- Smart asset management will continue to look for strategies that help manage both current income and long-term liabilities.
What policy makers can do
- Over the long term, policy makers hold many of the keys to global retirement security.
- Setting effective regulations and tax incentives that encourage plan participation and retirement savings is a critical first step.
- Understanding the investment strategies needed to meet liabilities is critical to setting smart regulation: Liquidity concerns must be balanced with the need to shore up sustainability of income over the long term.
- The needs of an ever-growing elderly population must be a priority in budget debates. It’s no easy task as many solutions will require additional spending, which could further add to already record levels of public debt.
What asset managers can do
- Asset managers are at the nexus of global retirement security, connecting individuals, employers, institutions and policy makers.
- The industry should not only lead in providing the investments needed to grow pension pots, but they should also take the lead on some of the issues that are critical to global retirement security.
- Product leadership may help address the long-term needs of individuals and institutions.
- Social leadership is needed in the area of income equality.
Learn More
Global retirement security is a worthy goal. If stakeholders live up to their role and responsibility, it can be within reach. To learn more about the key threats to global retirement security – and see where your country ranks – download our full report.
Top 10 Countries for Retirement Security
The Natixis 2020 Global Retirement Index reveals the ten countries that exhibit the best practices for retirement security.
All investing involves risk, including the risk of loss. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Natixis Distribution, L.P. is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services are provided by affiliates of Natixis Investment Managers.
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