Protecting the Promise

The 2018 Natixis Global Retirement Index (GRI) reveals how the promise of retirement security has been threatened in the decade since the financial crisis—and how 43 nations around the world are being affected.

With the 10th anniversary of the financial crisis, major trends are shaping–and reshaping–the global retirement landscape. From fluctuating monetary policy, rising rates, and crumbling pensions to deepening government debt, changing demographics, and environmental threats, these trends raise a critical question: How can we protect retirement security around the world?

Top 10 Countries for Retirement Security

The Global Retirement Index tracks 18 factors across 4 sub-indicesfinances, material wellbeing, quality of life, and healthto provide a baseline for retirement security around the world.

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Five key threats to retirement security

Threat #1: Monetary policy that’s perpetually stuck in crisis mode

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A decade of low yields has had a profound effect on retirement security.

Institutions

  • Low rates today mean assets may have a lower value in the future — increasing liabilities for pension managers.
  • To ensure they have enough to meet those liabilities, pensions have less to work with to fuel long-term growth.
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Individuals

  • Many individual investors are forced to annuitize assets at a time when interest rates have never been lower.
  • Low returns leave pensioners faced with three choices:
    1. Live on lower levels of income than anticipated.
    2. Work longer, if they are able.
    3. Invest in riskier assets with higher income potential – and greater potential for losses.

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Threat #2: The growing weight of public debt

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Faced with the slowest, most anemic recovery in history, unabated public spending continued across the developed world. And as debt increases around the globe, it’s forcing tough policy and funding decisions that could impact millions of retirees.

Policy makers have limited funds.

  • Retirement benefits, education, and infrastructure compete for a share of those budgets.
  • As public debt increases, funding for retirement benefits and other social services decreases.

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Threat #3: Old age dependency keeps growing

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For public and private retirement systems to succeed, the number of younger individuals paying into the system has to be large enough to support the number of people taking payments out of the system. The problem today? These fundamentals have been eroding for decades.

The world’s population of individuals age 65+ is increasing1

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Policy makers have limited tools to stem the tide, few of which are popular:

  • Raise the retirement age
  • Reduce retirement benefits
  • Bring more people into the system via immigration

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Threat #4: Climate change

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From megastorms and megadroughts to rising ocean temperatures and other environmental factors, climate change can have a dramatic – and often overlooked–impact on global retirement security.
By 2100 the Iberian Peninsula will be susceptible to megadroughts that can last up to 15 years. There are millions of retired expats in Spain.2
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US coastal areas experienced $306 billion in storm-related losses in 2017.3

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Threat # 5: An eroding quality of life for retirees

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After the financial crisis, unemployment continued to climb – even when markets started to rebound. High unemployment can have a profound effect on retirement security:
  • It reduces the tax revenues needed to fund pensions, healthcare, and social services.
  • It limits employment opportunities for those who want – or need – to keep working.
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Healthcare costs in retirement are also on the rise, which means individuals risk not saving enough and running out of money.

In 2014 the US spent $9,403 per person on healthcare, with the next highest country being Luxembourg at $6,812 per person.4

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What is the Global Retirement Index?
The Global Retirement Index was compiled in May 2018 by Natixis Investment Managers and CoreData Research. The Index includes International Monetary Fund advanced economies, members of the Organization for Economic Co-operation and Development 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 43 nations studied.


Read the full Report

 


1 "World Population Prospects: The 2017 Revision." World Population Prospects, 2017. Accessed August 7, 2018.

2 Johnston, Ian. Spain and Portugal Could Be Hit by 'megadroughts' Lasting 15 Years by 2100, Finds Study." The Independent. May 26, 2017. Accessed August 07, 2018. 

3 "2017 U.S. Billion-dollar Weather and Climate Disasters: A Historic Year in Context | NOAA Climate.gov." Global Warming Frequently Asked Questions | NOAA Climate.gov. January 08, 2018. Accessed August 07, 2018.

4 “Health expenditure per capita, PPP (constant 2011 international $).” World Bank WDI 2017. Accessed February 8, 2018.

This material is provided for informational purposes only and should not be construed as investment advice.

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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