The Natixis Global Retirement Index was formulated in 2012, as the world was emerging from the global financial crisis. The index ranks countries in respect to retirement security, examining the ability for individuals to live with dignity in retirement.
Whilst financial factors do play a key role, the index offers a multi dimensional view, examining 18 indicators across four key areas:
- Material means to live comfortably after retirement
- Access to quality financial services
- Access to good health services
- A safe environment.
Unsurprisingly, this year’s results have highlighted significant challenges, and deemed 2022 as being one of the worst years to retire, with the UK having consistently fallen in ranking over the last five years, to 19 out of 44 countries.
What are the key challenges being faced?
Soaring inflation, increased interest rates (resulting in volatile markets, especially in the short term) and ageing demographics are placing significant pressure on retirement security, not to mention the recent impacts of COVID 19 and the Russia/Ukraine conflict!
It is the responsibility of policy makers, employers and us as individuals to make the right choices in mitigating risks and improving retirement security. Whilst it may feel like many influencing factors are out of our control, in today’s complex financial environment it’s more important than ever for us, as individuals, to ultimately take control and ownership over our financial planning. Gone are the days of gold standard defined benefit pension schemes offered by employers, or a well resourced NHS to meet our needs.
Some key mistakes which the survey highlights being made in the financial planning process include:
- Underestimating the impact of inflation
- Underestimating how long you will live & not factoring in healthcare costs
- Overestimating investment income and setting unrealistic investment expectations
- Being too conservative or aggressive with investment strategies
- Failing to understand income sources
- Relying too heavily on public benefits
- Underestimating real estate costs
At Pathfinder we address each of these issues head on through a meticulous financial planning process. It’s our role to help clients understand and face up to the wide ranging challenges confronting their retirement security, and implement strategies placing them in the strongest position possible to meet their retirement objectives.
We invest time in getting to know our clients thoroughly, having open and frank discussions with them to ensure that we feed in accurate and realistic data into our financial planning models. Together, we create customised financial plans, supported with tailored investment strategies, which are continuously stress tested and interrogated, to help mitigate future risks and improve long term security.
Whether its down to busy work/life schedules, belief that retirement is too far away to worry about just yet, or the daunting nature of facing up to some of the concerns mentioned, a well constructed financial plan will improve retirement security in the long term.