Australia is seen as an economically secure nation, one that can guarantee a certain standard of living for retirees. But according to new data, that reputation may be beginning to slip.
The 2023 Nataxis Global Retirement Index (GRI) reveals retirement security is improving in most developed countries – with one or two notable exceptions.
The GRI measures a suite of factors across 42 countries that contribute to retirement security – factors such as financial stability, healthcare access, climate, governance and overall happiness.
Australia has dropped two spots in the rankings this year, from fifth to seventh, on the back of rising interest rates and soaring living costs. The situation is much the same across the ditch, with New Zealand also dropping two spots from sixth to eighth.
The top five most secure countries to retire were all in Europe: Norway, Switzerland, Iceland, Ireland and Luxembourg.
However it’s not all bad news. Both Australia and NZ are still inside the top 10 countries for retirement security, and the report says the situation has improved overall for virtually all countries across the board.
“Retirement security is looking better for most developed countries, with rising rates, easing inflation, low unemployment in key markets – and with the pandemic fading in the rearview mirror,” the report says.
“In fact, nearly all the countries represented in the 2023 Natixis Global Retirement Index received a higher overall score for the first time in a decade.”
Why the drop?
Australia has ranked inside the top 10 for the ninth consecutive year and the two-spot drop comes even though we received a higher overall score than last year (78 per cent vs 75 per cent in 2022).
The lower ranking is a result of even greater improvements in the highest-ranked countries, and probably a bit of stagnation here.
The data also shows that Australians are retiring later than their peers around the world. The median retirement age across all countries surveyed was 61, while in Australia the Age Pension age is now 67.
What did we do right?
We’ve stayed highly ranked primarily by achieving top 10 rankings in both the finances in retirement (third, up from fourth in 2022) and health (ninth, and in 2022) sub-categories. The nation saw quite a jump in material wellbeing, securing 13th place compared to 19th in 2022, and we retained 15th place for quality of life.
The most significant factor behind the improved ranking comes from bank non-performing loans, where Australia rises from 10th to fifth. These might seem unconnected to retirement security, but they contribute to the overall stability of the financial system.
Worried about inflation
But while the facts show the economic situation is improving for most retirees globally, the GRI showed that isn’t reflected in individual retiree confidence and optimism.
And it seems like inflation is the culprit behind the gloomy thinking. Australia’s inflation measure, the Consumer Price Index (CPI), saw a one percentage point drop between the March and June quarters.
The inflation situation is also easing in other developed economies. But extensive negative media coverage of the opposite has people well and truly spooked. More than four in 10 survey respondents (42 per cent) said that inflation had drastically changed their vision of retirement.
For those still working, 68 per cent said that inflation has significantly hurt their ability to save for retirement.
Natixis IM country head Louise Watson says it’s concerning that Aussies are retiring later than other countries even though the superannuation system is world-class.
“This really shows how important it is for us to make our investments work as hard as possible while we are employed and well into retirement,” she says.
Do you feel your retirement is secure? Has the recent economic climate changed your plans? Let us know in the comments section below.
Also read: How to avoid big financial mistakes in retirement