Two-thirds of Canadian investors confident about retirement: survey

Canada moved down two spots from last year to number 10 in Natixis Investment Managers’ 2021 global retirement index. Although 66% of non-retired Canadian investors surveyed were confident they’d be financially secure in retirement, one in four (25%) said financial security in retirement would “take a miracle.”

The global retirement index assesses factors that drive retirement security, calculating a mean score in key categories and combining category scores to rank 44 nations. For the third consecutive year, Iceland topped the index, followed by Switzerland and Norway.

While countries in the top 10 performed well overall, Canada’s fall to number 10 can be primarily attributed to its slightly lower scores on retirement finances (69% this year, versus 72% in 2020) and quality of life (75% this year, versus 77% in 2020).

Retirement finances captures the soundness of a country’s financial system and respondents’ access to quality financial services to help preserve savings and maximize income. Quality of life captures environmental factors as well as happiness.

Canada’s lower score on retirement finances was due to its lower scores across indicators such as bank non-performing loans (the proportion of defaults), tax pressure, old age dependency and interest rates. Still, Canada had the fifth highest global score for bank non-performing loans — a positive indicator.

The index’s accompanying report noted the impact of declining interest rates on Canadian retirees’ investments. Long-term rates in Canada were just above 3% in 2010 and just under 1% last year, the report illustrated.

More than half (54%) of Canadian respondents were concerned that low rates would make it harder to generate retirement income.

The challenge of low rates “is compounded as retirees look to maintain their principal,” the report said. “Often, it requires investments in riskier assets […]. Retirees are wise to be wary of the impact low rates can have on their ability to generate income off personal savings.”

The report also showed Canada ranked ninth among countries in the Organization for Economic Cooperation and Development for most public debt, and Canada’s debt-to-GDP ratio was the tenth highest of all countries in the index. Government spending had an impact on respondents’ retirement outlooks, the report noted.

Increased government spending during the pandemic “has many individuals worried about the implications for their retirement benefits,” it said. “In fact, three-quarters of individuals said they believe the increased levels of public debt they see today will result in reduced public retirement benefits down the road.”

While low interest rates make debt more manageable for governments, if rates rise, policy-makers could increase taxes or cut benefit payments. Prospective retirees may be inclined to delay their retirement due to these factors.

Further, 83% of Canadian investors said it’s increasingly their own responsibility to fund retirement as opposed to relying on either a public or private pension. About 47% of Canadians said it would be tough to make ends meet if public benefits were lower than expected going forward, including 28% of high-net-worth respondents.

About the survey: In March and April 2021, Natixis surveyed 8,550 investors internationally, including 300 in Canada. Each respondent had minimum net investable assets of C$120,000, and high-net-worth respondents had more than US$1 million in total worth, minus the value of their primary residences.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.