Norway Tops Global Retirement Index, Singapore Down At 25th - Natixis

Tom Burroughes Group Editor 22 July 2016

Norway Tops Global Retirement Index, Singapore Down At 25th - Natixis

A measure of retirement security puts the Nordic country at the very top out of a list of 25 states - with Singapore at the bottom.

A measure of retirement security places Norway as having the most robust system out of 25 major world economies, with Switzerland in second place, while Singapore languishes at the bottom.

The results come from the latest edition of Global Retirement Index, which is published by Natixis Global Asset Management. GRI, developed by Natixis and CoreData Research, looks at factors affecting how secure people can be in retirement, based on 18 performance measurements. There are four broad measures considered in the index: finances in retirement, material well-being, health and quality of life.

Ranked third is Iceland, followed by New Zealand, Sweden, Australia, Germany, Netherlands, Austria, Canada, Finland, Denmark, Luxembourg, US, Belgium, Ireland, the UK, Czech Republic, Israel, France, Japan, South Korea, Malta, Slovenia and Singapore. 

“While retirement funding is emerging as a major challenge for most economies around the world, the problem is unequivocally more pressing in developed nations due to a massive demographic transition that is changing the retirement landscapes in these economies. Retirement systems are still at nascent stages in many developing countries, and the provision of state retirement security is sometimes not well-developed as a concept,” Natixis said in its report, which is the fourth edition of this index. A total of 43 nations were studied.

The study showed that 77 per cent of 7,100 people in 22 countries surveyed said they will have to assume greater responsibility for funding their retirement. In Switzerland, for example, three-quarters of investors believe that the responsibility for funding retirement is on their shoulders. Seven in 10 investors globally rank retirement as a top financial planning priority, yet they may not have an accurate picture of what it will take to be successful.

On average, individuals worldwide believe they will need to replace 64 per cent of pre-retirement income for life after work, an estimate that is short of the 75-80 per cent most experts believe is a realistic benchmark. 

Some 62 per cent of individual investors say they are in a workplace retirement programme.

“But considering that our survey respondents are relatively high earners with an average of $200,000 (or purchase price parity [PPP] equivalent) in investable assets, the 38 per cent who say they do not participate may be troubling,” it said.

“We see some of the highest numbers of respondents participating in workplace retirement plans in Colombia/Peru (87 per cent), Chile (85 per cent), Hong Kong (76 per cent), and Taiwan (73 per cent). Each of these countries has well-developed policies that focus on workplace savings plans. Among the countries with the lowest levels of reported participation are Italy (42 per cent), Spain (43 per cent), and Singapore (55 per cent). In each of these countries, workers rely on government pension benefits for a significant share of their retirement funding." 

On Norway, Natixis said: "Like most Western countries, Norway’s retirement system is built upon three pillars: government benefits, employer pensions, and personal savings. In recent years, each of these pillars has been strengthened through smart fiscal policy and good economic fortune: in 2011, new income-based provisions were added to the government pension that’s supported by Norway’s $850 billion sovereign wealth fund. This complements a 2006 policy that strengthened occupational pensions by introducing compulsory workplace savings. Personal savings have benefited from a robust economy with low levels of income inequality, low inflation, and low unemployment.

"But as much as Norway sets a benchmark for retirement security, recent economic developments underscore just how fragile this foundation can be. With an economy that is heavily reliant on North Sea oil, Norway has felt the effects of a worldwide collapse in commodities prices," it added. 

Turning to Singapore, the asset management firm said: "Singapore finishes this year’s GRI in 25th place with a score of 65 per cent. Under the revised methodology, the country maintains its ranking from 2015 and achieves a particularly strong score in finances in retirement, where it ranks second overall, while its showing in the other sub-indices is more muted."

It added: "With a few exceptions, Singapore is a standout performer when it comes to the finances in retirement sub-index (second). It boasts the lowest tax burden of all countries in the GRI, has the fourth best score for interest rates and the sixth best score for bank non-performing loans. However, the country faces some concerns regarding a rapidly ageing population as the old age dependency ratio is projected to triple from current levels by 2050. The country’s governance score, where it is one spot away from being in the top ten, is a further reason for optimism. Singapore also improved in the tax pressure indicator. Meanwhile, Singapore would have performed extremely well in the material well-being sub-index had it not been for its score in income inequality. The country has the highest income per capita and lowest unemployment but on the downside has the fourth highest level of income inequality of all countries in the GRI. Singapore also improved in the tax pressure indicator. Singapore's performance in the health sub-index is decent, with an impressive display in the life expectancy indicator." 


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