Canada ranks 10th in a list of countries that provide the best retirement security, according to the latest global retirement index published today by Natixis Global Asset Management.
Canada fell just below several northern European countries, including Norway (No. 1), followed by Switzerland, Iceland, Sweden, Germany, the Netherlands and Austria, as well as New Zealand (No. 4) and Australia (No. 6).
The Nordic countries provide good insights for the rest of the world, says David Goodsell, executive director of the Durable Portfolio Construction Research Center at Natixis. “They have strong social programs, health care, well-funded public pensions and workplace pensions. What you find in those regions is all of the pieces are working together to provide good retirement security for individuals.”
Read: How does Canada’s public pension system measure up globally?
In reviewing the 43 countries that comprise the list, Natixis determined rankings based on four components: finances in retirement, material well-being, health and quality of life.
Canada fared well for having a high per-capita income, low levels of income inequality and a solid health-care system, including “excellent” health insurance coverage. But low interest rates and relatively high levels of government debt aren’t as favourable to Canada’s retirees, according to the research.
Another Natixis survey published earlier this year found that while 72 per cent of Canadians expect to fund their own retirement, 45 per cent don’t participate in a workplace savings plan.
Furthermore, 52 per cent of respondents to the previous survey said they plan to continue working during retirement, although many underestimated the income they will need to retire by about 15 to 20 per cent. Investors estimated they need to replace only 60 per cent of their current income, while the standard assumed by planning professionals is generally 75 to 80 per cent, according to Natixis.
Read: Women 80% more likely to be in poverty after retiring than men: study
Providing good retirement security will require a combined effort from the public and private sector, says Goodsell. But employers, in particular, need to review the benefits they offer and how they encourage employees to participate in workplace retirement plans, he adds.
Read: Most Canadian workers would leave job for better retirement support: survey
For instance, in Britain, employers have introduced strategies such as automatic enrolment and annual increases in contributions to evolve their retirement plans, says Goodsell, noting those features keep people focused on retirement and take away the effort required to maintain their plans.
He suggests that overall, member education is key. “It’s beyond the simple discussion of what diversification is and really educate people on how investing works and how they can better take advantage of their plan.”
Top 25 countries in the global retirement index*
- Norway
- Switzerland
- Iceland
- New Zealand
- Sweden
- Australia
- Germany
- Netherlands
- Austria
- Canada
- Finland
- Denmark
- Luxembourg
- United States
- Belgium
- Ireland
- United Kingdom
- Czech Republic
- Israel
- France
* — Based on 43 countries
Source: Natixis Global Asset Management
Read: How to prepare employees for the psychological impact of retirement