Australia has been ranked among the top countries in the world for retirement security for the fourth consecutive year.
The Natixis Investment Managers Global Retirement Index (GRI) assessed 44 countries on retirement security including factors such as health, finances, environmental factors and gender equality.
New Zealand was in sixth place while Australia was in seventh with Iceland in first place.
Australia was helped by its high ranking for finances in retirement, where it placed third, due to the compulsory superannuation system.
However, this had been impacted by the COVID-19 pandemic and market downturn which had negatively affected super balances and investment returns. Natixis IM said it was “too early” to assess the impact of the early access to super measures.
Damon Hambly, chief executive of Natixis IM Australia, said: “While Australians have benefited from mandatory superannuation, many retirees 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.
“Australia has always ranked highly for finances in retirement, thanks to our superannuation system, and it’s too early for the GRI to assess the impact of the early access scheme to future retirement outcomes. What we do know is that those who took up the offer, who were mainly younger and lower income workers, may be disproportionately affected due to the effect of compound earnings.”
Australia was also noted for its bushfire season at the beginning of 2020 as an indicator that climate-change risks were becoming more severe. There were almost $100 billion in direct damages caused by the Australian bushfires.
“As demonstrated by recent Australian wildfires, climate-related natural disasters are becoming more severe and more frequent, and they are leaving vulnerable retirees exposed to higher levels of physical and financial risk,” he said.
The ranking for interest rates fell to 10th place as the Reserve Bank of Australia cut rates to 0.25% but it remained higher than other countries where rates were negative. The problem with falling interest rates was it would force retirees to dip into their retirement savings at a faster rate and may outlive their savings.
The top five “critical retirement risks” identified by Natixis IM were recession, lower interest rates, public debt, climate change and income inequality.
Retirement security ranking
Source: Natixis IM