Several countries in northern Europe and Scandinavia rank higher in the study by Natixis Global Asset Management. Norway is number one, followed by Switzerland and Iceland. However, because of a revised methodology, Canada’s 2015 ranking is two spots higher than under the 12th place spot it had under the survey’s older methodology. The Natixis Global Retirement Index was introduced in 2013, and bases its overall retirement security scores on four factors affecting the lives of retirees.
A central component is of course finances but three sub-indices measure well being, health and quality of life, providing a more holistic view of retirement than mere financial considerations.
Low interest rates a drawback for Canadian retirees
The index shows Canada has a relatively high per-capital income and low levels of income inequality: It spends “substantial amounts” on health care and provides excellent health insurance coverage, the survey says. However, Canada’s retirees also suffer somewhat from low interest rates and relatively high levels of government debt.
“The former makes it difficult for older Canadians to keep up with increased living costs; the latter could affect the country’s ability to finance social programs over the long term.”
Increasingly, the burden of saving for retirement is falling on the shoulders of Canadian investors. A Natixis investor survey earlier this year found 72% said the costs associated with old age will fall increasingly on individuals rather than government.
And while 72% of Canadians see retirement as their highest financial priority, many are nevertheless underestimating how much money they will need to save in order to retire comfortably. Almost half (45%) are not members of a workplace-based pension plan. Even so, many felt a 60% replacement ratio will suffice, versus 75 to 80% cited by the financial industry. Of course, retirement experts and actuaries like Fred Vettese and Malcolm Hamilton have argued about 50% is sufficient.
Health, longevity and inflation biggest hurdles
The three greatest challenges to financial security in retirement are long-term care and healthcare costs; outliving their money and inflation. Asked how they would overcome an income shortfall, 52% said they will continue to work in retirement.
The complete rankings are shown below:
NATIXIS GLOBAL ASSET MANAGEMENT
2016 Global Retirement Index
Comparison Based on Revised 2015 Rankings
* — Based on 43 countries
** — Based on 150 countries