Natixis Global Asset Management Releases Findings from the 2017 Global Retirement Index
- Americans fall behind in life expectancy and find themselves less happy as economic opportunity becomes increasingly unbalanced; US shows strength in healthcare spending and financial institutions, and shows gains in environmental factors.
- Norway, Switzerland and Iceland top annual retirement security index.
- "The Economics of Retirement" special report is first in a series offering insight on the issues affecting retirees around the world.
Now in its fifth year, the Natixis Global Retirement Index seeks to provide a measure of how supportive the climate is for retirement across nations in the developed world. It creates an overall retirement security score based on 18 key drivers of retiree wellbeing across four broad categories: Finances, Health, Material Wellbeing and Quality of Life.
According to data compiled by Natixis, several factors affected the overall score for the US (72%) in this year’s index:
- Lagging life expectancy in a healthcare-rich nation: The US maintained its No. 7 ranking in Health, its highest among the sub-indices, in part because it spends more per capita on healthcare than any other country in the index, and it has the sixth-highest score for insured expenditure on health, which measures the portion of that expenditure paid for by insurance. However, the US ranked only 30th in life expectancy, as Americans’ longevity failed to keep pace with top-ranked Japan and other nations, suggesting its health expenditures may not be yielding the same return on investment.
- Growing gap in economic opportunity: The US has the fifth-highest income per capita among all nations in the index, but it registered higher levels of income inequality compared to last year, yielding the sixth lowest score for income equality in the Material Wellbeing category. The results suggest that millions of lower-income Americans are missing out on that economic growth and may struggle to save for a secure retirement as a result.
- American retirees are less happy: The US experienced a slight decline on Quality of Life measures since 2016, chiefly attributed to a poorer showing for the happiness indicator, which is based on surveys that evaluate the quality of retirees’ current lives. However, the U.S. improved on environmental factors in part due to cleaner air.
- Strength of financial institutions: The US again ranked in the top 10 for Finances, largely due to improvements in bank non-performing loans and federal debt levels relative to other nations. However, the US has the seventh-highest public debt as a percentage of GDP of all countries in the index, and an increasing ratio of retirees to employment-age adults (old-age dependency), putting pressure on government resources such as Social Security and Medicare. At the same time, low interest rates and tax pressures negatively affects savings rates and income in retirement.
The Best Performers
The top 10 countries in the 2017 index include eight from Western Europe, including Norway at No. 1, followed by Switzerland, Iceland, Sweden, Germany (No. 7), Denmark (No. 8), the Netherlands (No. 9), and Luxembourg (No. 10). New Zealand (No. 5) and Australia (No. 6) complete the top 10. These countries benefit from a combination of strong social programs, widely accessible healthcare and low levels of income inequality.
On a regional basis, even though Western Europe dominates the top 10 rankings, Western Europe collectively ranks lower than North America (Canada and the U.S.). This reflects the challenges of other countries in Western Europe – mainly, Italy, Portugal, and Spain – as they continue to struggle with financial setbacks. The index also illustrates the “Great Divergence,” as some economists call it, between Western Europe and North America, on the one hand, and the rest of the world on the other. North America’s overall score was 73%, and Western Europe’s was 70%. The next highest regions were Eastern Europe and Central Asia with a score of 50% and Asia Pacific at 34%.
Longer lifespans. Larger liabilities.
The rapid growth of the senior population is forcing many countries to rethink their public pension systems. Pension managers are under pressure as increased lifespans and a long period of historically low interest rates have increased liabilities and created a funding shortfall. The world’s six largest pension saving systems, which includes the United States, are expected to reach a $224 trillion gap by 2050, a study by the World Economic Forum shows.1
The threat of unfunded liabilities has led to a significant change in employer retirement plan offerings, with many organizations freezing traditional pension plans and transitioning to defined contribution plans, a switch that shifts the liabilities for retirement funding from the employer to the employee. Individuals in the U.S. are well aware of the challenge ahead of them. In a survey of investors conducted by Natixis earlier this year, 78% feel that funding retirement will fall increasingly to them rather than to the government.
The economics of retirement security: a global view
The country comparison provided in the Global Retirement Index is intended to spur a larger discussion about what is needed to improve retirement security globally. In the first of three supplemental reports to the Index, Dave Lafferty, Chief Market Strategist for Natixis Global Asset Management in Boston, and Philippe Waechter, Head of Economic Research for Natixis Asset Management in Paris, discuss the long-term prospects for economic growth and the challenges of monetary policy, longevity, pension fund shortfalls, inflation, old-age dependency and related pressure on government resources.
“It may be obvious that a higher economic growth rate means higher earnings on assets deferred to the future,” according to Lafferty. “What’s not so obvious is that when economic growth is higher, the incentive to save is better. Yet higher long-term real and nominal growth rates can’t be generated in a secular low-growth period. It’s very hard for people who are just getting by to even justify saving in the first place, never mind how much they’re going to save, or how fast it’s going to grow.”
Commenting on the growing ratio of retirees to employment-age adults, Waechter said, “In the past, life in retirement was 10 to 15 years; now it’s 25 to 35 years. It will be increasingly challenging for countries to balance retirement schemes where the young generations are paying for their elders, because there are too few workers contributing, current productivity growth is too low to generate sufficient income to pay pensions for the number of people living longer, and macroeconomic conditions have changed. Growth, wage inflation and interest rates could remain low for an extended period of time. To create the surplus needed for the transfer of wealth from the present to the future, productivity growth must come back, and we have to think differently about the arbitrage between pension levels, retirement age and worker contributions.”
To download a copy of the Global Retirement Index report, visit ngam.natixis.com/us/research/global-retirement-index-2017.
The top 20 nations, along with their standing in last year’s Global Retirement Index, are:
| 1. Norway (No. 1 in 2016) | 6. Australia (6) | 11. Canada (10) | 16. Czech Republic (18) |
| 2. Switzerland (2) | 7. Germany (7) | 12. Finland (11) | 17. United States (14) |
| 3. Iceland (3) | 8. Denmark (12) | 13. Austria (9) | 18. United Kingdom (17) |
| 4. Sweden (5) | 9. Netherlands (8) | 14. Ireland (16) | 19. France (20) |
| 5. New Zealand (4) | 10. Luxembourg (13) | 15. Belgium (15) | 20. Israel (19) |
The Global Retirement Index assesses factors that drive retirement security across 43 mainly developed economies where retirement is a pressing social and economic issue. It was compiled by Natixis Global Asset Management with support from CoreData Research, a UK-based financial research firm. The index includes International Monetary Fund (IMF) advanced economies, members of the Organization for Economic Co-operation and Development (OECD), and the BRIC countries (Brazil, Russia, India and China). The report captured data from a variety of sources, including the World Bank. The researchers calculated a mean score in each category and combined the category scores for a final overall ranking of the 43 nations studied.
About Natixis Global Asset Management
Natixis Global Asset Management serves thoughtful investment professionals worldwide with more insightful ways to invest. Through our Durable Portfolio Construction® approach, we focus on risk to help them construct more strategic portfolios that seek to endure today’s unpredictable markets. We draw from deep investor and industry insights and partner closely with our clients to put objective data behind the discussion.
Natixis Global Asset Management is ranked among the world’s largest asset management firms.2 Uniting over 20 specialized investment managers globally ($895.6 billion AUM3), we bring a diverse range of solutions to every strategic opportunity. From insight to action, Natixis Global Asset Management helps our clients better serve their own with more durable portfolios.
Headquartered in Paris and Boston, Natixis Global Asset Management, S.A. is part of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Global Asset Management, S.A.’s affiliated investment management firms and distribution and service groups include Active Index Advisors®;3 AEW Capital Management; AEW Europe; AlphaSimplex Group; Axeltis; Darius Capital Partners; DNCA Investments;4 Dorval Asset Management;5 Emerise;6 Gateway Investment Advisers; H2O Asset Management;5 Harris Associates; Loomis, Sayles & Company; Managed Portfolio Advisors®;3 McDonnell Investment Management; Mirova;7 Natixis Asset Management; Ossiam; Seeyond;7 Vaughan Nelson Investment Management; Vega Investment Managers; and Natixis Global Asset Management Private Equity, which includes Seventure Partners, Naxicap Partners, Alliance Entreprendre, Euro Private Equity, Caspian Private Equity and Eagle Asia Partners. Not all offerings available in all jurisdictions. For additional information, please visit the company’s website at ngam.natixis.com | LinkedIn: linkedin.com/company/natixis-global-asset-management.
1 https://www.weforum.org/press/2017/05/global-pension-timebomb-funding-gap-set-to-dwarf-world-gdp/
2 Cerulli Quantitative Update: Global Markets 2016 ranked Natixis Global Asset Management, S.A. as the 16th largest asset manager in the world based on assets under management ($870.3 billion) as of December 31, 2015.
3 Net asset value as of March 31, 2017. Assets under management (AUM) may include assets for which non-regulatory AUM services are provided. Non-regulatory AUM includes assets which do not fall within the SEC’s definition of ‘regulatory AUM’ in Form ADV, Part 1.
4 A division of NGAM Advisors, L.P.
5 A brand of DNCA Finance.
6 A subsidiary of Natixis Asset Management.
7 A brand of Natixis Asset Management and Natixis Asset Management Asia Limited, based in Singapore and Paris.
8 Operated in the U.S. through Natixis Asset Management U.S., LLC.
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