UK retirement security improves, reaching all-time high in natixis IM’s 2024 Global Retirement Index (GRI)

• The UK climbs two positions to achieve a record-high 14th place, outperforming France and the United States, driven by increases in health spending per capita 
• Globally, Switzerland takes top spot in the rankings, dethroning Norway which finished at the top of the index for the past two years
• Despite a six place improvement for the UK since 2014, individuals are increasingly feeling the strain of funding their own retirement due to rising unemployment and income inequality.

Global retirement conditions have remained stable this year following significant improvements in nearly all developed countries in last year’s index, according to Natixis Investment Managers’ 2024 Global Retirement Index (GRI). In the UK, retirement security has improved compared to its developed market peers, reaching 14th in the index to achieve its best position to date.

The UK’s performance is largely attributed to steady improvements in the GRI’s Health Retirement sub-index, the measure of life expectancy and health expenditure, where the country’s score has risen by three percent since last year. Contributing to this rise was the UK’s five place improvement in health expenditure per capita, with its score improving from 81% to 84% as overall health spending recovered in the years following the global pandemic.

Meanwhile, the UK experienced a slight improvement in the Material Wellbeing sub-index, moving to 21st place, just outside the top 20, as rising unemployment and income inequality continued to weigh. The country maintained its score in the Finances in Retirement sub-index, prompting a downward shift by three places in the rankings to 18th. Despite inflation falling one spot to 30th, the indicator saw a notable improvement as higher interest rates took hold, with its score rising from 54% to 83%.

For the four sub-indices, the UK ranks as follows in the 2024 GRI compared to the year prior:

• 18^th for Health, staying 18^th place   
• 21^st for Material Wellbeing, up from 22^nd   
• 11^th for Quality of Life, staying 11^th place 
• 18^th for Finances in Retirement, falling from 15^th

A Global View of the 2024 Index 

The top performers in Natixis IM’s annual Global Retirement Index (GRI) have delivered more consistent rankings across all sub-indices, showing a stabilising global retirement outlook. The list of countries that rank in the top 10 of the index has remained the same for two consecutive years. However, individuals are feeling the pressure as more and more come to the realisation that they are on their own when it comes to funding income later in life.     

• Switzerland has knocked Norway off the top spot with an overall score of 82%, putting Norway (81%) in second place.
• Iceland maintains its third place ranking for the second year in a row despite experiencing declines in most subindices. Notably, Iceland saw its Health ranking drop by seven places (out of the top 10 to 11th) even after increasing its score slightly.
• Norway has seen a decline in both the Material Wellbeing sub-index, from 1^st to 6^th, and in Finances and Retirement, falling out of the top ten in that sub-index to finish 12^th due to decreases in the tax pressure indicator, old-age dependency and governance.
• Luxembourg rises by four percentage points to gain first place in the Health sub-index, driven by an increase in its life expectancy score, overtaking Norway which previously held top spot. 
• Slovenia and Belgium rise by four ranking points each, with Belgium rising to 15^th from 19^th and Slovenia just missing out on the top ten by rising to 11^th from 15^th.
• Ireland takes the number one spot in the Finances in Retirement sub-index, after improving its score by one percentage point to 74% on account of steadily reducing government debt.

Individuals increasingly feel they’re on their own when preserving retirement security

Despite the generally positive outlook for global retirement security, results from the long-running Natixis Global Survey of Individual Investors* show that the number of individuals who believe it is increasingly their responsibility to fund retirement on their own, rather than to rely on public and private pensions, grew from 67% to 81% between 2015 and 2023. Additionally, the number of individuals who believe it will take a miracle to achieve retirement security increased from 40% in 2021 to 45% in 2023.

One in five (19%) investors said that even if they saved $1million, they still couldn’t afford to retire – that includes 18% of those who have already accumulated $1 million.

Andrew Benton, Head of Northern Europe and MEACA at Natixis IM, said, “The past few years have seen some big shifts that impact our finances and plans for the future: the ongoing transition from defined benefit to defined contribution pensions, rising public debt bills, short term shocks like Covid, and geopolitical tensions firing up inflation, all of which drive anxiety about financial futures for individuals. Whilst retirement security has  improved in the UK, individuals are increasingly taking their retirement security into their own hands, given the changing market backdrop. In light of this shift, financial services providers need to be more proactive in helping people to save more – to and through retirement – by offering better support and solutions that are tailored to today’s environment and individual retirement needs, including access to both public and private markets if we are to help prevent a retirement crisis down the line.”

The four key risks facing individuals today:

• Interest rates:  While low rates had been a key risk for retirees for the 15+ years following the Global Financial Crisis, today’s higher rate environment presents new risks.  Most notably with more than $6 trillion^[1] in retail assets invested in money market funds, certificates of deposits and similar instruments, they need to be aware of how today’s cash trap could keep them from meeting their need for a sustainable source of long-term income.

• Inflation: The worst of it may be past as inflation slowly recedes towards central bank targets, but the post pandemic bout of rising prices has served as a stark reminder of just how fast and how severe inflation can be. Now that 83% of investors say recent events reminded them of just how big a threat inflation poses to their retirement security, investors will need to act accordingly to ensure they a prepared for any new episodes down the road.

• Public Debt: Public debt in OECD countries has more than doubled in the first quarter of the 21^st Century as policy makers first navigated the Global Financial Crisis and then the Global Pandemic. While the steps were needed to stave off economic meltdown in the short term, policy makers are left with paying down long-term debt. A growing number of individuals are concerned they will be asked to pick up the tab and worry it will result in cuts to the government retirement benefits that are a cornerstone for their retirement income plans.

• Ourselves: A secure retirement is a journey not a destination. Success requires realistic expectations and meaningful commitment from individuals. While many may appreciate this in concept, not every investor sets makes reasonable assumptions and sets realistic goals.  Natixis Investor survey results show that investors do not have a consistent vision for what it will take to succeed.

To view and download a full copy of the report, visit https://im.natixis.com/en-intl/insights/investor-sentiment/2024/global-retirement-index