Canada has dropped one spot in a list of the countries that provide the best retirement security, according to the latest global retirement index by Natixis Global Asset Management.
Canada holds the No. 11 spot this year compared to No. 10 on last year’s index, and trails several European countries including Norway (No. 1), Switzerland, Iceland and Sweden. The top countries outside of Europe are New Zealand (No. 5) and Australia (No. 6).
While it declined slightly compared to its ranking last year, the difference between Canada and Luxembourg, which took over the No. 10 spot, is very marginal, says Dave Goodsell, executive director of the Durable Portfolio Construction Research Center at Natixis.
Read: Survey ranks Canada 10th for retirement security
He notes the retirement index is very relative, so a move in ranking doesn’t necessarily mean one country did better or worse than last year. “I think what we saw was Luxembourg had a few gains while Canada, its scores [in some factors] stayed the same and in a couple dropped a little bit. So it was a tight race.”
In reviewing the 43 countries that comprise the list, Natixis determined its rankings based on four components: finances in retirement, material well-being, health and quality of life.
Canada retained its strong performance in finances in retirement (73 per cent) and health (87 per cent) but it declined slightly in quality of life (81 per cent from 82 per cent) and material well-being (65 per cent from 70 per cent).
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Canada continues to perform well in health, and its life expectancy improved compared to last year, according to the study. This indicator is important because it points to retirees having access to affordable care, says Goodsell, noting a solid health system remains one of Canada’s strongest assets.
The country also boded well in financial stability due to an increase in the five-year average of real interest rates, which tend to grow the level of wealth among retirees, according to Natixis. Canada’s financial governance continues to be strong, but its old-age dependency ratio has risen, which puts stress on the government programs that support retirees.
As well, rising levels of income inequality pushed down Canada’s grade in material well-being. While it still outranks the United States, Canada declined in employment and income per capita compared to last year, which hints that many Canadians may be struggling to save for a secure retirement, the study noted.
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Meanwhile, northern European countries continue to dominate the top 10 list. Goodsell thinks it’s because they’ve built solid foundations for their financial systems and continue to provide a strong quality of life for citizens.
“A lot of these countries have either avoided the financial challenges 10 years ago or they’ve recovered from them quickly,” says Goodsell. “Iceland is a great example of that. They made it a prime directive to get their banking system in order after what had happened, and they turned around rather quickly through really smart regulation.”
Retirement security, however, is a complex concept to measure, he says. “There’s a lot of different variables at play. And I’d say what I see in Canada overall, those issues tend to be managed well and that contributes to this solid ranking that Canada seems to have each year.”
Read: How does Canada’s public pension system measure up globally?
