The pandemic has been a turning point in the quality of retirement in Spain. The health impact on the older cohort of the Covid crisis and the socioeconomic imbalances that have been experienced since then have made a dent in the well-being of the older population in our country. This is reflected in the latest installment of the World Pension Index prepared by the investment fund manager Natixis Investment Managers on the quality and security at the time of reaching retirement. In this ranking, Spain occupies position 38, six positions less than in 2021, of the 44 countries analyzed. Only China, Greece, Turkey, Colombia, Brazil and India have worse scores. So our country is already the second worst in terms of retirement quality among the EU countries and the worst if we only look at the performance of the great powers.
According to the report, "retirement security iscommitted to the world under increasing pressure, as inflation, market volatility and low interest rates are eating into savings for them." The study also reveals that “2022 could be one of the worst years to retire in recent memory, as retirees risk not only having to dip into their already eroded retirement savings, but they will have to take greater risks in their portfolios to recover the ground already lost”.
It should be remembered that the indicator is made from the evaluation of 18 performance sub-indices, grouped into four large thematic indices that cover key aspects for well-being during retirement: material means to live comfortably during retirement; access to quality financial services in order to preserve the value of savings and maximize income; access to quality health services, and a clean and safe environment in which to live.
Thus, Spain ranks 18th in health. It is the only sub-index in which Spain has grown, with a score of 85% in this edition, compared to 82% in 2021 and the 83% it held 10 years ago. It ranks 19th in quality of life; subindex in which Spain maintains the score of 74% in 2022, identical to that of 2021. Of course, in 2012 it was somewhat higher, registering 76%. In the retirement finances category, Spain ranks 22nd, in which this year it has obtained a score of 59%, lower than 2021 and 2012 when their respective scores were 61% and 69%. Finally, the index places us in position 40 in material well-being with a score of 15% in this edition compared to 35% in 2021 and 58% in 2012.
Free fall in the last decade
Furthermore, broadening the spectrum, it does not seem that the reforms of the public pension system introduced in 2011 and 2013 -the latter repealed de facto with the new legislation approved this year- have served to improve the different aspects that are valued in this index of facing retirement.
Specifically, Spain has dropped from 26th place in 2012 to 38th place in this year's edition, which represents a decrease of 12 places in 10 years. The main indicators that explain this fall are the sub-indices of material well-being and finances. In the case of well-being, determining factor is the employment indicator. With regard to finances, elements such as non-performing loans from banks, interest rates, dependence on the elderly and public debt come together.
On the other hand, Spain has improved in the health sub-index, thanks to, among other things, having registered the fourth highest position in the life expectancy indicator; and in the quality of life sub-index thanks to a higher score in the happiness indicator and in the biodiversity indicator.
“The uncertainty that dominates the global context means that individuals must take on greater responsibility for planning their savings for retirement and also when selecting investment product providers. In this sense, it is essential that the appropriate incentives are promoted to promote long-term savings”, warns Sophie del Campo, Natixis manager for Southern Europe, Latam and US Offshore.
At the same time, they assure from the manager that financial professionals have to adapt and put the client at the center of the entire strategy: "you have to be close to him at all times to ensure that the products and services offered are completely aligned with their needs, especially given the current circumstances. They ensure that the key is knowing how to build long-term portfolios, well diversified, uncorrelated and that contemplate the principles of sustainability.
For much of the last decade, inflation has been exceptionally low. Between 2012 and 2020, inflation in the 38 OECD member countries was just 1.76% on average. However, in the first half of this year, it increased in those 38 countries, reaching pick up the IPC 9.6% in May 2022 (latest data available).
“The speed at which costs have risen gives reason to rethink the fundamentals of retirement planning. The notable increase in the cost of oil, food and housing is reducing the purchasing power of retirees and constitutes a fundamental economic lesson for people who are planning their retirement, ”say the authors of the study that emerges from the Index.
The Nordics lead the ranking
Looking at the top of the ranking, among the countries with the best retirement quality, Norway regains number 1 after spending four years in position 3. For its part, Iceland, which had been in first place since 2018, falls to third position , while Switzerland held firm at number 2.
The rest of the countries that make up this year's top ten are Ireland (4th), Australia (5th), New Zealand (6th), Luxembourg (7th), the Netherlands (8th), Denmark (9th) and the Czech Republic ( 10th). Luxembourg and the Czech Republic were among the top ten leading countries for the first time this year. Germany and Canada, which were among the top ten countries last year, fell to 11th and 15th places, respectively, in this year's indicator.
As manager Natixis IM warns, even regions with young populations could soon face challenges, as improvements in the areas of nutrition, health care and the environment favor longevity, while low birth rates contribute to the gradual aging of the population. general. “This is the case for both China and Latin America in 2022,” she points out.
“The challenges that exist today and for the future are clear. Getting it right when it comes to managing retirement and helping people to live with dignity after finishing their working lives is a key sustainability issue for society. The responsible politicians will be forced to make difficult decisions when they try to reconcile balance sheets with public pension and healthcare commitments”, explains Sophie del Campo.