2019 Global Retirement Index
September 18, 2019
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12 min read
Dave Goodsell
Executive Director, Natixis Center for Investor Insight – Natixis Investment Managers – US Distribution
Global Security. Personal Risks.
From uncertain economics to aging demographics to climate change, global retirement security faces a wide range of modern risks. These issues have sweeping implications for a sustainable society. But, while they need to evaluate from both global and national perspectives, the ultimate risks to retirement security actually lie closer to home.
Our 2019 Global Retirement Index reveals three key threats to retirement security – interest rates, demographics, and climate change – as well as what they mean for individuals and institutions.
3 critical threats to global retirement security
Retirement policy makers, pension and plan sponsors, and individuals around the globe face significant risks – from the viability of providing retirement benefits to the financial risks individuals are forced to assume in retirement saving and the ability of public and private institutions to deliver benefits over the long term. The 2019 Global Retirement Index reveals three critical threats.
1
Interest rates
Low rates may stimulate borrowing, but they also present a significant hurdle for those saving for retirement and those looking to generate income. Individual investors also expect a hefty 11.7% average return from their investments.1 Institutional investors say 6.7% is more realistic.2
What do we need from stocks to achieve return expectations?
Source: Natixis Investment Strategies Group; based on assumed bond return of 2.52% (Bloomberg Barclays US Aggregate Bond Index as of July 2019)
Performance data shown is based on past performance and is no guarantee of, and not necessarily indicative of, future results.
2
Demographics
Rapidly aging populations pose one of the biggest risks to pension planning, but longevity also represents a key risk for retirees. Old-age dependency is a critical factor for retirement security.
Old-age dependency is the ratio of people over the age of 65 to the working-age population, age 15–65. It illustrates how many people are putting money into the system, compared to the number likely to take money out. Why does old-age dependency matter? For example, it raises key questions about pensions. Will institutions be able to pay out pensions? Will retirees find that their pensions are cut because they’re underfunded? Old-age dependency can also have implications for policy, taxes, and retirement benefits.
And this may be most important for Generation Z. UN projections show that individuals in developed regions who reach age 65 in 2015 will live an average of 19 more years.3 By 2065, Generation Z retirees should plan for living another 24 years in retirement and current systems will be challenged to keep up.
What do we need from stocks to achieve return expectations?
Source: United Nations. World Population Prospects 2019. Statista. https://population.un.org/wpp/
3
Climate change
A long-term risk to global sustainability presents an immediate financial risk today. While the risk of climate change is often viewed through a long-term lens, today it presents tangible health and financial risks to millions of retirees that will challenge policy makers around the world.
The realities of retiring to the beach
While retiring to the beach can be idyllic, the consequences of climate change mean retirees may also face some very real – and daunting – financial challenges. These risks not only affect individuals, as climate change can have costly impacts for policy makers as well.
Get more insight into these key threats, as well as detail on the how and why of country rankings.
About the 2019 Natixis 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.
1 Natixis Investment Managers Global Survey of Individual Investors, conducted by CoreData Research February-March 2019. Survey included 9,100 respondents in 25 countries.
2 Natixis Investment Managers Global Survey of Institutional Investors, conducted by CoreData Research October-November 2018. Survey included 500 respondents in 28 countries.
3 United Nations. World Population Prospects 2019. Statista. https://population.un.org/wpp/
4 World Health Organization. Climate change and health. (2018). https://www.who.int/news-room/fact-sheets/detail/climate-change-and-health
5 Nelson, Arthur. “Climate change could make insurance too expensive for most people – report.” The Guardian, March 21, 2019. https://www.theguardian.com/environment/2019/mar/21/climate-change-could-make-insurance-too-expensive-for-ordinary-people-report
6 United Nations. The Ocean Conference Fact Sheet: People and Oceans. (2017). https://www.un.org/sustainabledevelopment/wp-content/uploads/2017/05/Ocean-fact-sheet-package.pdf
7 World Health Organization. Climate change and health. (2018). https://www.who.int/news-room/fact-sheets/detail/climate-change-and-health
8 “Compound Costs: How Climate Change Is Damaging Australia’s Economy.” Climate Council of Australia. Updated May 14, 2019. https://www.climatecouncil.org.au/wp-content/uploads/2019/05/costs-of-climate-change-report-v3.pdf
9 “What We Don't Know About State Spending on Natural Disasters Could Cost Us.” Pew Trusts, June 19, 2018. https://www.pewtrusts.org/en/research-and-analysis/reports/2018/06/19/what-we-dont-know-about-state-spending-on-natural-disasters-could-cost-us
The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.
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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