Retirement security in the UK improved for the first time in five years, moving up three positions to place 16 and increasing its overall score from 69 per cent to 73 per cent, according to Natixis Investment Managers’ 2023 Global Retirement Index (GRI).
The UK’s positive score is primarily fuelled by strong performance in the Finances in Retirement sub-index as the country leaps fourteen places to 15th in that category following improvements in tax pressure and government indebtedness indicators. The score is also enhanced by a much higher rating on the interest rates index following a series of rate hikes conducted by the UK’s central bank to rein in spiralling inflation.
The UK’s rankings improved significantly in Finances in Retirement, moving up from 29th to 15th place, and Material Wellbeing, up from 23rd to 22nd. But there was a slight decline in Quality of Life, falling from 7th to 11th place, while the Health ranking improved from 21st to 18th.
Despite improved index scores, retirement security faces challenges such as inflation fears, misunderstood rising interest rates, concerns about public debt, demographic shifts, and unrealistic expectations about retirement lifespan and investment returns.
Natixis IM’s additional research on individual investors highlights that the overall optimism doesn’t necessarily translate into everyday confidence, as concerns about retirement persist among individuals. In the UK, while nearly 73 per cent of individual investors with over $100,000 in investable assets feel positive about their finances, 60 per cent express significant concerns about inflation affecting their investments, and 53 per cent believe it’s significantly impacting their ability to save for retirement.
The study also indicates global attitudes, with 56 per cent of respondents believing they will have freedom in retirement but 48 per cent worrying that it will take a miracle to achieve a secure retirement, 28 per cent anticipating a frugal retirement, and 21 per cent expecting to work after retirement.
Natixis Investment Managers executive managing director and head of Northern Europe & MENA Andrew Benton says: “After a decade of low inflation and double-digit investment returns from equities, many individuals have had unrealistic expectations. However, the past year has been a reality check and arguably a reset of these expectations.
“Saving alone won’t allow most people to reach their retirement goals, and so investing and working with professionals are important steps to achieving financial security in retirement. Whilst retirement security has improved globally and, in the UK, individuals need to set realistic goals and maximise the opportunities to save, no matter how far away retirement may seem.”
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