Natixis Investment Managers has placed Australia seventh in the world for retiree wellbeing in 2020, with the superannuation system boosting the nation to third in finances.
The ranking has come from this year’s Natixis Global Retirement Index (GRI), which has rated 44 countries on the factors that drive retirement security.
Australia placed third overall in the finances in retirement sub-index, although the country’s ranking in interest rates (10th) and bank non-performing loans (seventh), indicators of the financial system, fell year-on-year. While Australia’s cash rate remained relatively low at 0.25 per cent, 16 other countries measured had negative rates.
Australia did not however rank highly in terms of income and gender pay parity. The country fell in the middle of all others for material wellbeing, which captured income equality, income per capita and unemployment (although it had risen from 24th in 2019 to 22nd this year).
Damon Hambly, CEO for Natixis Investment Managers in Australia commented local retirees are facing the prospect of living for longer on lower incomes, as the nation battles through a recession.
“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,” Mr Hambly 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.”
Mercer and AIST research has estimated people on lower incomes are set to be disproportionately affected by an estimated $100 billion shortfall in savings at retirement as a result of the early release.
Natixis also pointed to Australian female retirees facing a different set of circumstances compared with their male counterparts when it comes to material wellbeing.
Data from the government’s Workplace Gender Equality Agency has shown 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.
Natixis Investment Managers managing director and head of distribution for Australia and New Zealand, Louise Watson, commented it is important for the super and retirement industries 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,” Ms Watson said.
COVID had its impact on the 2020 index, as interest rates fell across the world, with a number of high-performing countries now showing negative rates.
Older age groups are also more affected by the pandemic, Natixis reported, with there being a wave of higher death rates for the cohort across the globe. In Australia, the majority of COVID-related deaths recorded have been in those aged over 70.
Jean Raby, chief executive of Natixis Investment Managers commented: “Balancing the needs of current and future retirees with other public policy demands has 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.”
The COVID crisis has also naturally created financial challenges for Aussie retirees, which has added to the difficulty many already had in figuring out how to make their nest egg last.
Mr Hambly said while Australians have benefited 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.”
Climate risk and health
Australia had the seventh-lowest score for environmental factors, with Natixis noting climate aspects added health concerns and financial risk.
The nation ranked 15th in the quality of life sub-index, on par with its 2019 ranking but much lower than 2017, when it listed at ninth.
However, it did improve its happiness and air quality ratings – Australia had the sixth-highest score for air quality.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].