Canada dropped in Natixis’ annual ranking as inflation, interest rates and income inequality took a toll
By: Mark Burgess
© Wavebreak Media / 123RF
Canadians are underestimating the impact of longevity, inflation and health-care costs on their retirement savings, and that’s making the country a less secure place to retire, a new report says.
After reaching the top 10 for the first time last year in Natixis Investment Managers’ global retirement index, Canada dropped to number 15 this year.
“In a year on track to be one of the worst on record to retire, the market downturn coupled with runaway inflation and successive interest rate hikes poses an immediate threat to retirees and suggests the need for new thinking about retirement planning and policy,” Natixis said.
The responsibility for retirement security continues to fall on personal savings, the report said, with longevity driving the amount of savings required, the investment returns needed, and spending rates.
Natixis’ survey of financial advisors said Canadians commonly underestimate how long they’ll live, the cost of health care and the impact of inflation. Many also said clients are too conservative with their investments.
“Retirement security challenges have come home to roost in 2022,” said Dave Goodsell, executive director of the Natixis IM Center for Investor Insight, in a release.
Inflation is affecting spending power and rate hikes have had a negative effect on investment portfolios, he said. “Investment strategies, financial planning, employee benefits and policy considerations will all need to factor in a new funding equation that accounts for inflation, interest rates and increased longevity.”
Natixis’ ranking of 44 developed countries is based on scores for 18 performance measures across four categories: finances in retirement, material well being, health and quality of life.
Canada didn’t crack the top 10 in any category. It maintained its 11th ranking for health but fell to 27th for material well being, Natixis said, based on lower scores for income inequality, income per capita and employment.
Canada’s score for finances was also lower, based on increased tax pressure, higher interest rates, government indebtedness and a higher ratio for old-age dependency (the number of people over 65 per 100 people of working age).
The report warned that the growing population of seniors would strain the Canada Pension Plan, especially as governments grapple with rising public debt.
The top countries in Natixis’ ranking were Norway, Switzerland, Iceland, Ireland and Australia. The U.S. was ranked 18th and the U.K. was 19th.
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