How Australia fared in 2020 Global Retirement Index

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Low interest rates, COVID, a recession – the challenges are thick on the ground for retirees and pre-retirees. And while Australia is in seventh place in the Natixis Global Retirement Index (GRI), the outlook is sobering.

The index, published since 2012, rates 44 developed countries on 18 factors in four categories that drive retirement security: finances in retirement, material wellbeing, health, and quality of life.

The report said that COVID-19 had made life tougher for millions of retirees, saying: “The chances for a financially secure retirement depend on a fragile balance of social, economic and public health pressures. The global coronavirus pandemic has tipped the scales further against retirees.”

The top three nations worldwide are unchanged from 2019. Iceland is in first place, Switzerland in second and Norway third. Nine of the top 10 have been in the top 10 in each of the past two years and Australia has now been in the top 10 for four straight years. In 2019, we slid three places to ninth, though that was changed to seventh this year due to updated methodology. In 2018, we were sixth.

Ireland was fourth after improving its performance in each of the past few years, from seventh in 2018 to fifth in 2019 to fourth this year.

The Netherlands was the biggest mover from 10th to fifth. The other countries in the top 10 were New Zealand (No. 6), Canada (No. 8), Denmark (No. 9) and Germany (No. 10) up from 13th place last year.

Australia was 10th in the health sub-index, 22nd in the material wellbeing sub-index, and 15th in the quality of life sub-index – on par with its 2019 ranking but much lower than in 2017, when it was ninth.

It placed Australia in third place for finances, on the back of our superannuation system, although our ranking in interest is low at 0.25 per cent; the report noted that 16 countries had negative rates.

The report said that retirement security in developed nations was under threat from lower-for-longer interest rates, record levels of public debt, recession, income inequality and climate quality.

Jean Raby, CEO of Natixis Investment Managers, said that balancing the needs of current and future retirees with other public policy demands had “long been one of the most intractable issues for nations around the world, and the global pandemic and its economic fallout have only compounded the challenge”.

Damon Hambly, CEO for Natixis Investment Managers in Australia, said retirees in Australia faced the prospect of living for longer on lower incomes.

“Possible solutions may include a higher retirement age, and for retirees to reconsider how they think about retirement – possibly continuing to work into their retirement,” he said.

“The asset management industry also has a role to play in taking the lead on products that will address the long-term needs of individuals and institutions to have a real impact on global retirement security.”

In a supplementary report to the index, titled What Could Possibly Go Wrong?, Natixis identified the five issues it believes present the greatest threats for retirement security.

The long-term impact of the recession on savings: The speed and severity of the global economic slowdown stemming from the COVID-19 outbreak are greater than those in recent recessions. Resulting measures taken to cover income shortfalls may dampen the savings needed for future retirement security. For instance, workers may make hardship-based early retirement withdrawals that are never replaced.

Falling interest rates disadvantage retirees: Rates have been at historic lows for a dozen years. Lower rates may require individuals and institutions alike to be more creative about how they prepare to meet longer-term needs and commitments.

Fiscal stimulus raising public debt: The $12 trillion of fiscal and monetary stimulus provided globally has kept economies afloat during the pandemic, but will magnify already high levels of public debt. While low interest rates keep debt servicing costs manageable today, those same low rates may tempt policymakers to boost spending, further increasing public debt. In order to control spending in the future, governments could be forced to raise taxes, including on retirees, and reduce funding for retiree healthcare programs and public pensions.

Climate-related disasters threatening retirees: As seen in bushfires in Australia, wildfires in California and typhoons and hurricanes in Africa, Asia and the Americas, climate-related natural disasters are becoming more frequent and more severe. Air pollution, too, is worsening, posing greater safety and health risks for vulnerable retirees, including chronic cardiac and pulmonary illnesses. Such disasters also have financial implications, including higher insurance costs, increased food expenditure as crops fail and greater housing expenses as storm severity grows.

Inequality worsens economic outcomes: The issues of inequality – of race, gender and other factors – have come to the fore. Research globally illustrates race and gender gaps in both worker pay and access to workplace retirement plans, with implications for inequality in retirement income.

Data from the Australian government’s Workplace Gender Equality Agency (WGEA) shows that women earn on average 20.8 per cent less than men across occupations and sectors. Women also live longer on average and tend to retire earlier, facing greater risk of outliving their assets.

Louise Watson, Natixis Investment Managers managing director and head of distribution for Australia and New Zealand, said the super and retirement industries needed to work together to find ways to close the gender wage and retirement gaps.

“Lower wages mean lower super balances, so improving wage equality and general financial literacy is an important step for our industry to take to make sure that women are empowered to take control of their financial future,” she said.

Mr Hambly said that while Australians had benefitted from mandatory super, “many still had balances too low to sustain their lifestyle through retirement”.

“Now, Australian retirees whose balance has been affected by market disruption throughout 2020 may have to reconsider what their retirement looks like,” he said.

“It is important for everyone involved in the retirement income system – individuals, employers, institutional investors, policymakers, and asset managers alike – to recognise and adapt to the additional challenges presented to global retirement security.”

Australia had the seventh-lowest score for environmental factors, with Natixis noting climate aspects added health concerns and financial risk.

*The Global Retirement Index assesses factors that drive retirement security across 44 countries where retirement is a pressing social and economic issue. It was compiled by Natixis investment managers with support from CoreData Research. The index includes International Monetary Fund (IMF) advanced economies, members of the Organisation for Economic Cooperation and Development (OECD) 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 44 nations studied.

Are we still the ‘lucky country’? Has COVID forced a major re-evaluation on retirees and pre-retirees all over the world? Have you already been forced to make adjustments to your finances?

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Written by Janelle Ward

11 Comments

Total Comments: 11
  1. 0
    0

    Self funded retirees would put Australia last on the list !!

  2. 0
    0

    There are some aspects of the table which don’t seem to make sense. How can one of the most expensive countries in the world like Norway have one of the lowest financial wellbeing indexes yet the highest quality of life and material wellbeing indexes? By contrast Australia has one of the better finance indexes but low quality of life and poor material wellbeing. Does this mean that Australian retirees waste their money or that they would be happier and better off if the pension was reduced?

    • 0
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      Easily answered Viking.

      All surveys, studies, reviews, indexes, or whatever else one wishes to call them, are produced in the following manner;

      1. Find a sponsor to fund your “research”
      2. Ascertain the sponsor’s expected/preferred conclusions
      3. Write the conclusions i.a.w. the sponsors expectations/preferences
      4. (This is the hard bit) Design a research survey which can only result in achievement of the required conclusions.
      5. Ensure all available sponsor funds are consumed during the “research” phase (It is mandatory to also ask for more) with the overwhelming majority of funds flowing to yourself.
      6. This “research” phase should be stretched out over a ridiculously long time period,
      and you should use this time to –
      – Write your memoirs/biography (in case the “research” succeeds in making you famous)
      – Line up future employment prospects for the post research years
      – Long lunches and networking with political types to establish the possibility of a future career in politics
      – Anything else you wish to do, always remembering to limit the time wasted on actual “research” to the bare minimum possible

  3. 0
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    Possible solutions may include a higher retirement age. You are kidding. I don’t think I’ll be able to work to current one.
    I believe older people retiring earlier would free up jobs for young. With unemployment so high this would be sensible instead of paying jobseeker To the young , pay a pension to elderly who want to retire. And assist them if they want to keep working.
    The way they are talking it will be older people taking the jobs who have no choice but having to work when they actually would like to retire. But can’t get pension so keep struggling on.i know many people like this. And many young who need jobs and if they don’t work for a few years , they will become unemployable.

    • 0
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      You might have noticed, Life experience, that it’s those who have to wreck their bodies in heavy manual labour jobs, dangerous jobs, or jobs in unhealthy workplaces who are being forced to work longer. They are the lowest paid and despite being forced to destroy their health just to survive, they are expected to keep working way past their ‘use by’ date. On the other hand, the politicians, fat-cat bureaucrats, members of useless ‘think tanks’, academics, etc. can afford to retire whenever they choose, although in their ‘do nothing’ roles, they could easily work until they drop dead.

    • 0
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      Young again. There is an easy solution: the rule should be work and pay tax for 45 years and you are entitled to a pension. Mothers would have this period reduced by five years for each child. This would mean those who start work at 16 retire with a pension at 61; professional student who start work at 26 would retire at 71. Easy and the tax records would be the sole basis for eligibility.

    • 0
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      Works for those who retain fair health and are able to access job opportunities, Viking. What of those who are kicked and beaten before they are old enough to work and go through life struggling with major health issues, no education or trade training, and repeated periods of unemployment because their health issues and poor education mean they are the first to be sacked when times are tough? What of those who are victims of a pandemic – retrenched after 30 years of work and unable to get another break? Mothers can have 5 years off for each child, but what if the child is disabled and needs extensive care? What of the person who sacrifices their career to care for a chronically ill or seriously disabled spouse or parent? Your system would punish people for having it tough early in life by making their later years hell.

      These glib ideas work in a perfect world, but leave the underprivileged out in the cold in the real world.

    • 0
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      BTW Viking, those in forced to do dangerous jobs, work in unhealthy workplaces etc. would find it all but impossible to put in 45 years. A loved one worked in a dangerous, low paid job and had to quit at age 40, then struggled on intermittent casual work from then on because he had no qualifications. If he lived in the US and did that dangerous job, he’d be retired on a special pension at 45, IF he lived that long (since the survival rate is about 40%)!. You think he should be deprived of a pension because he didn’t pay tax for 45 years? Try operating our society without electrical linesmen to keep the power system working! But your system would punish men harshly for working in that capacity, unless they were lucky enough to retain their health AND find other suitable work to do for their last 20 years in the workforce.

      Ask miners if they can keep going down for 45 years, and what they might do if they have to quit.

      It’s just not as simple as telling everyone they have to work and pay tax for 45 years to enjoy a decent retirement.

    • 0
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      Young again. Firstly having an independent power and water supply and sewage system I’d manage quite well without electrical linemen, thank you.

      Of course there would need to be provisions and exceptions for people of disadvantage. As I was unaware that YLC posts were the place for writing complete social security Acts of Parliament. I simply wrote a basic outline of a system which would obviate the need for a common retirement age and allow those who started work younger and worked harder to retire earlier than those who delayed their working life.

      Companies and organisations which provide dangerous work should be responsible for the long term welfare of their workers as the asbestos producers were eventually and reluctantly forced to do. The danger of the work should be priced into the job as it is for many workers including miners.

      Howver, I strongly believe that any country which punishes hard work and success and rewards failure will eventually fail.

  4. 0
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    As a former resident and still a citizen of Switzerland I can see the advantages and disadvantages very easily. Since 1947 they have a compulsory superannuation scheme where the employee/employer pays in a certain percentage of income from age 18, it is for old age and infirmity only. No early access etc, hardship cases. At 65 years of age (females at 64) you qualify for the age pension which is quite high by our standards. To get the full one you should not have missing contribution years or your pension will be reduced. Should the person not make it to 65 the money will go to the folks that make it further than that. The deceased person will get nothing but the spouse will get her/his part till she/he passes on. No asset test or income test but taxation on everything including asset taxes as well as capital gains taxes. Straight forward really but it would never wash here because people would not want to put money in if the family would not get something out of it after one’s death. Also the maximum pension will be the same never mind what percentage you put in all your life. Currently CHF2375 (CHF1 = $A1.52). That is sustainable as a lot of people are getting older but also quite a few never see 65.


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