Canada has lost its position as one of the top 10 countries in the world in providing its senior citizens a secure retirement, according to Natixis Global Asset Management’s latest edition of the Global Retirement Index, published on Wednesday.
Trailing Australia, New Zealand and eight countries from Western Europe, Canada ranked 11th — falling one spot from last year — among 43 developed countries ranked on retirement security based on finances, health, material well being and quality of life.
In a news release, the firm said that the countries that received top 10 rankings profit “from a combination of strong social programs, widely accessible health care, low levels of income inequality and excellent work-based retirement savings plans.”
Canada’s decline in performance can be attributed in part to a lower ranking in the material well being category resulting from increasing income inequality. Many Canadians are not receiving the benefits of economic growth and may be struggling to save money for retirement, the report says.
That said, Canada was ranked among the top 10 countries in the finance category with improved scores in the tax pressure indicator, meaning that Canadians are facing less of a tax burden and able to accumulate more disposable income for their retirement years.
“This year’s Global Retirement Index is an important reminder that retirement security is a complex, multi-dimensional issue that is vastly influenced by a nation’s policies, politics and economics,” says Ed Farrington, executive vice president of retirement for Natixis, in a statement.
“The population is getting older, making retirement security one of the most pressing social issues facing the world,” he adds. “Factors such as increasing longevity, income inequality and the impact of monetary policy on personal savings and pension liabilities are challenging the long-standing assumptions about how individuals plan for and live in retirement.”
Pension liabilities, in particular, are growing as lifespans continue to increase. As a result, many organizations have ended defined-benefit pension plans and moved to defined-contribution plans, transferring the liability of retirement funding to the employee from the employer.
Canadians are well aware of this transition and are less reliant on government support. In a retirement study published by Natixis in June, 78% of Canadians say they believe the onus will fall on them to ensure they have enough income to sustain retirement.
“In the past, life in retirement was 10 to 15 years; now its 25 to 35 years,” says Phillipe Waechter, head of economic research for Natixis Global Asset Management, in a statement.
“It will be increasingly challenging for countries to balance retirement schemes where the young generations are paying for their elders,” he adds, “because there are too few workers contributing, current productivity growth is too low to generate sufficient income to pay pensions for the number of people living longer, and macroeconomic conditions have changed.”
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