Retirement security in the U.K has declined for the fifth year in a row.
2022 is the most challenging year to retire in recent history, according to the . Bank nonperforming loans, tax pressure, and governance were cited as the factors which drove the UK to a lower score in the finance index.
U.K. retirement today
In March 2020, the Bank of England base rate was lowered to a 300-year low of 0.1%. Now, with the longer-term economic effects of the pandemic, inflation, market volatility, and shortages caused by the Russian invasion of Ukraine, the rate has been raised to 1.75%.
Considering all the factors at work, it turns out that public pensions are taking a bigger hit than private pensions.
“The maths on inflation ultimately works out for the better for private pensions. With inflation driving rates up and liabilities down, these managers generally see their contribution rate decline. On the public side of pensions, the maths may not be as advantageous,” explained Natixis IM head of northern Europe Andrew Benton.
U.K. retirement in the coming decades
The number of pensioners is on the rise in the U.K., as it is around the world. The reason? Increased life expectancy. Over the next three decades, the number of people 65 and older will increase from 17.3% to an estimated 26%, according to the Organisation for Economic Co-operation and Development.
Natixis states it this way: “The number of retired people out of every 100 within a population is set to rise from 32 to 47 by 2050. This is where the math becomes most concerning for policymakers. A larger population that will live longer breaks the formula behind most ‘pay-as-you-go’ retirement systems.”
U.K. retirement compared to other countries
Within the 44 countries included in the Natixis 2022 Global Retirement Index, the U.K. ranks 19, with an overall score of 69% for 2022, down from 72% last year. The number one spot, held by Norway, had an 81% score.
The index used four main aspects of retirement that included a total of 18 indices. The four main categories were: the material means to live comfortably after retirement; access to quality financial services; access to good health services; and a safe environment.
The U.K. ranked 29 out of 44 in the Material Wellbeing category. Both this category and the Health category ranked lower than last year. However, the U.K. ranked a respectable 7th place for Quality of Life.
Eight of the top-ten-ranked countries are in Europe: 1) Norway, 2) Switzerland, 3) Iceland, 4) Ireland, 7) Luxembourg, 8) Netherlands, 9) Denmark, and the 10) Czech Republic. The fifth and sixth spots were held by Australia and New Zealand. Ireland has seen the largest gain in the index rankings over the last decade, moving from 38th to fourth.
Top retirement planning mistakes
Research for this year’s Natixis index revealed the top retirement planning mistakes to correct now:
- Underestimating the impact of inflation
- Underestimating how long savers live
- Underestimating retirement income
- Being too conservative with investments
- Setting unrealistic return expectations
- Forgetting to factor in healthcare costs
- Not understanding income sources
- Relying too much on benefits
- Underestimating real estate costs
- Being too aggressive with investments
Why you need a personal investment advisor you trust
Both being too conservative and being too aggressive with investments is on this list, making it difficult to find the right balance. An advisor should be able to help but always check the relevant local regulator’s website to check that the firm and/or the advisor is appropriately licenced to advise you or you will have little chance for recourse if something goes awry.
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