South Korea has risen up a global index of nations where residents will be better able to meet their retirement needs, while Japan and Singapore both fell. China remains down the rankings.
Korea jumped 10 places to 17th place in the 2nd annual Global Retirement Index of 150 nations published by Natixis Global Asset Management. Japan dropped out of the top 20 to 27th, while Singapore landed in 41st spot. In Asia Pacific, Australia was highest ranked in seventh place.
The index is based on analysis of 20 trends across four broad categories: health and health-care quality; personal income and finances; quality of life; and socio-economic factors. The index does not take pension provision into account.
The higher up the list a country finishes based on its aggregated scores, the better its retirement security, while the reverse is true as the list descends.
Health-care quality would include provision of medical insurance and hospitals, while government indebtedness was added to the finances indicator, which also takes into account such things as inflation and tax.
“People are living longer, and because of that they need increased health care and physical infrastructure such as doctors and hospital beds,” notes Madeline Ho, head of Asia-Pacific wholesale fund distribution at Natixis.
“If you are living longer, what is the dependency ratio like in a particular country? Will you have more or less money to spend because of inflation, interest rate pressure and government indebtedness, which as a category looks at the likelihood of government solvency in future.”
It was the addition of government indebtedness to this year’s categories that prompted Japan’s slide down the rankings, given its debt-to-GDP ratio of almost 230%. In this category Japan placed 148th out of 150.
It also scored poorly on factors such as interest rates and tax pressure, following a year in which the Japanese government has had to take drastic action to attempt to bring rates up – with limited success.
Government indebtedness was one category that helped to bolster South Korea’s position. “It had no recession during the global financial crisis and it has scored well in terms of inflation, its interest rate environment and tax pressure,” notes Ho.
Meanwhile, Singapore scores well in the finances sub-index. However, Natixis notes that recent developments have seen the welfare of its retirees decrease relative to other nations, while increased income inequality and drops in environmental indicators contributed to its lower ranking this year.
China’s ranking actually improved four places to 69th and it was praised for increased spending on health care. However, the report notes: “Although Chinese retirees are able to benefit from relatively low tax pressures, in terms of material well-being, income inequality is continually increasing and China is one of the worst-ranked nations for air pollution and climate change.”
The index does not rank Hong Kong separate to China, currently, although Ho suggests this is likely to happen in future.
Overall, eight of the index’s top 10 are European nations led by Switzerland, Norway and Austria. Korea was among the most improved performers, along with New Zealand and Iceland.