Singapore is top in the world for retirement finances, but among worst for retirees' quality of life: Study

SINGAPORE - Singapore emerged the global top scorer in retirement finances this year, although it performed poorly for retirees' quality of life and material well-being, according to an annual retirement security index released on Friday (Sept 20).

In the overall ranking, the city-state remained at 28th place out of 44 countries surveyed in the latest edition of the Global Retirement Index for 2019 by Natixis Investment Managers.

Retirement finances here refers to the soundness of a country's financial system, the level of savings and investment, and the preservation of the purchasing power of savings.

Quality of life captures the level of happiness and fulfilment in a society, air quality, water and sanitation, biodiversity and habitat, as well as natural environment factors.

Among Asian countries, Singapore came in third for overall retirement security, behind Japan and South Korea, who took the 23rd and 24th spots respectively in the global ranking.

The index has 19 performance indicators that cover key aspects for welfare in retirement: having the material means to live comfortably in retirement; access to quality financial services to help preserve savings value and maximise income; access to quality health services; and a clean and safe environment.

The performance indicators are grouped into four thematic sub-indices - health, finances in retirement, quality of life, and material well-being.

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In the quality of life sub-index, Singapore slid by two spots to 41st out of 44 nations, dragged down by lower scores in the happiness and environment factors. Last year, the Republic fell to 39th place from 34th due to declines in air quality, biodiversity and environment factors.

None of the five Asian countries in the survey featured in the top 25 for quality of life.

There was a strong correlation in the overall index ranking and the quality of life sub-index, Natixis said. Seven countries finishing in the top 10 overall were also in the top 10 for the sub-index: Denmark, Switzerland, Norway, New Zealand, Sweden, Iceland and Ireland.

In the retirement finances sub-index, Singapore dethroned New Zealand to take the top spot this year, up from second place in 2018. The city-state finished first in the indicator for tax pressure, eighth in interest rates and 10th in governance. It also received a higher score in the bank non-performing loans (NPLs) indicator, which was the main driver of its improved ranking.

Among Asian countries, India jumped to 27th place for retirement finances from 36th place last year, thanks to better rankings in governance, interest rates and inflation. China also made progress with a double-digit climb in the inflation indicator. South Korea remained at last place in the region.

Countries with a strong overall ranking also tended to perform well in the retirement finances sub-index. Six of those in the top 10 overall index - New Zealand, Switzerland, Australia, Canada, Iceland and Ireland - also placed in the top 10 for retirement finances.

As for the health sub-index, Singapore entered the top 25, showing the biggest improvement globally. It climbed to 24th place from 29th last year, driven by higher scores in insured health expenditure and life expectancy.

Singapore still has room for improvement for insured health expenditure, which considers the level of expenditure in health that is not insured. Despite improving five places in this indicator, Singapore still had the seventh-lowest score for it globally.

As for the life expectancy indicator, Singapore moved up three spots to 4th place. A key metric of its health status, a country's improved life expectancy is linked to societal gains such as better sanitation and education and declining late-life mortality, Natixis said.

The increase in life expectancy also means individuals will spend more years working.

Those who live longer but retire earlier may potentially outlive their assets, and those who have not saved enough to keep up with their increased life expectancy face the danger of living in poverty, Natixis noted.

In countries with higher life expectancies such as South Korea and Japan, individuals continue to work beyond the minimum benefit eligibility age to stave off longevity risk.

Singapore also performed poorly in the material well-being sub-index, which measures the ability of a country's population to provide for their material needs. Singapore ranked 32nd out of the 44 countries, down from 29th last year.

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This was due to a slight drop in income equality, although the city-state retained the highest rankings for income per capita and employment indicators.

In Asia, only Japan fared better than Singapore for material well-being, taking 13th place globally. The highest score went to Iceland, for the second year in a row.

Ms Madeline Ho, executive managing director and head of wholesale fund distribution for Asia-Pacific at Natixis Investment Managers, said: "With the increasingly uncertain economic conditions and improved life expectancies, it has become imperative for individuals to be proactive in starting early for retirement planning.

"Individuals in Singapore are well-equipped to leverage a conducive environment to plan for their retirement security well into their silver years, given Singapore's established track record in good governance and a robust financial infrastructure."

Overall, the top three countries remained the same since 2016. The European trio of Iceland, Switzerland and Norway were the world's best performers, with Iceland unseating Switzerland for the top spot while the latter slipped to second place. Norway stayed at third place.

Western Europe continued to dominate as a region in the overall Global Retirement Index ranking, with 15 countries in the top 25 for the third straight year.

This article was first published in The Straits Times. Permission required for reproduction.