The financial outlook for elderly Britons is one of the bleakest in the Western world due to a “mediocre” financial system, a report has suggested.Story By Iona Bain
The UK’s financial infrastructure and retirement prospects was given one of the worst evaluations among developed economies in an 81-page report, The 2014 Global Retirement Index, published by Coredata Research and Natixis Global Asset Management.
The UK scored just 58 per cent in one of the sub-indices used for the research, the Finances in Retirement Index. Only Japan, Italy and the Netherlands had worse ratings, scoring 47 per cent, 53 per cent and 56 per cent, respectively.
Researchers looked at the “soundness of a country’s financial system”, as well as the likely returns on investments and the long-term purchasing power of savings, when compiling the Finances in Retirement Index.
Britain fared better in the overall Global Retirement Index, rising two places from 20th in 2013 to 18th today with a score of 74 per cent. It leapfrogged the US, which stayed in 19th place for the second year running with a score of 73 per cent.
Switzerland and Norway both topped the leaderboard with a score of 84 per cent, followed by Austria (81 per cent) and Sweden (79 per cent).
The report stated: “High tax pressures and increasing inflation have affected retirees’ current income and purchasing power, while increasing pressure on the UK pension system.”
Colin Bell, product director of European unit-linked guarantees at Aegon UK, said: “These figures paint a stark picture for those in their 40s and 50s, working hard to make ends meet and put as much as they can away for their twilight years.
“Those who are not turning to their children are often deferring their retirement instead, because they simply do not have enough saved up to fund their retirement.
So what can be done is the question. The bottom line: Employers, governments and individuals – the three legs of the global retirement savings stool – each have a role to play in improving the state of savings around the world. Employers need to be more flexible and open to considering programs that can broaden coverage; governments need to work together to institute meaningful, difference-making reforms; and individuals need to realize that they can no longer depend on the other two legs of the stool, and instead should focus on the factors they themselves can control – such as establishing a plan, setting goals and being more engaged.