Singapore Is The World's Best In Retirement Finances? Sure Not...

Wow, Singapore is ranked best in the world for retirement finances?!

I don’t know about you, but I didn’t believe it when I chance upon that piece of news.

How can that be the case when we all know that a large percentage of the elderly in Singapore are not financially prepared for retirement?

In fact, many low-income elderly require financial assistance from the government and welfare organisations to maintain their expenses.

So, who’s gonna believe that Singapore is ranked first when it comes to finances in retirement?

Before we start saying that this is fake news, let’s look at how this came about.

TL;DR – Singapore’s Global Retirement Index Ranking Explained

In the recent 2019 Global Retirement Index, Singapore ranked first in the Finances in Retirement Index as our financial system performed better as compared to the other 43 participating countries. 

That’s why you might be puzzled since it certainly doesn’t seem like everyone in Singapore is ready for their retirement. 

However, we only ranked 28th on the overall Global Retirement Index which covers Health, Quality of Life and Material Wellbeing. 

Our low ranking is largely due to the following: 

• Larger proportion of healthcare expenditure uninsured 
• A lower ranking on the World Happiness Report 
• A higher environmental impact which will affect our health during our retirement years
• Income inequality

What Is The Global Retirement Index?

While we’re trying our best to build our retirement portfolio to ensure that we have enough income to fund our retirement years, there are other factors that can threaten our retirement plans such as healthcare and the increasing cost of living.

Hence, the Global Retirement Index done by Natixis Investment Managers measures retirement security based on 18 factors, grouped into 4 main areas.

Singapore’s Ranking For The 2019 Global Retirement Index

If you think those numbers are pretty okay, well, we’re only ranked 28 out of 44 participating countries.

Finances in Retirement Index

If we’re ranked first in the world, then why are so many of us still not financially prepared for retirement?

Well, that’s because the Finances in Retirement Index doesn’t directly measure whether Singaporeans have sufficient savings and income to sustain their retirement.

Instead, this area measures the quality of Singapore’s financial systems, whether our financial services provide high returns for our savings and investments, which can, in turn, preserve our purchasing power of savings.

Singapore surpasses New Zealand this year in the Finances in Retirement Index; leading first in the indicator for Tax Pressure, since our lower tax rates allow for higher levels of disposable income.

We’ve also ranked 8th for Interest Rates Index, think high-interest savings accounts, and 10th in governance.  

The main reason why we performed so well for this index though, is our high score for the Bank Nonperforming Loans Index.

What’s this nonperforming loan I hear? 

Simply put, it’s a loan that hasn’t been paid back long past its due date.

Good for us then! This means our banks have been able to recover the funds loaned out.

So now we know it’s not measured on when we can withdraw our money out from CPF, guess it makes sense why we’re ranked first in Finances in Retirement then?

Thing is, with our population ageing rather quickly, how will we perform on this index in the years to come?

Health Index

Moving on to the Health Index, which is our next best performing area!

Our Health Index made the largest improvement, bringing us into the top 25 countries for this Index.

Yay!

One of the main factors that boosted our rankings was due to the increase of scoring for the Life Expectancy Index.

Generally, a longer life expectancy means that individuals will work longer and are, therefore, able to maintain their income and savings.

However, the index also takes into account that some individuals may retire earlier, which may lead to them outliving their savings.

Even though our scoring for the Non-Insured Health Expenditure Index improved, it’s still lacking behind, ranking the seventh-lowest amongst all participating countries.

Okay, not so yay anymore…

A lower score, like ours, means that there is a large proportion of expenditure in healthcare that is not insured. Individuals will then have to pay more out-of-pocket for their healthcare needs, which to them, reduces the accessibility to healthcare. 

Yeap, the pinch is real…

The GRI report even stated that there is room for improvement for our Non-Insured Health Expenditure Index. 

Ahem, insurance companies, please take note…

What about the other two areas? Surely, it’s not so bad?

Quality of Life Index

Guys, we’re ranked 41st out of 44 countries for this area…

In fact, there are only 5 Asian countries in the survey and none were in the top 25 countries for the Quality of Life Index.

But if you look at what constitutes the Quality of Life Index, you’ll see that our overall score was affected by the Happiness Index.

Even though we were the second happiest country in Asia, we were still ranked 34th in the 2019 World Happiness Report, far behind countries in the Scandinavian regions.

Well, this one is pretty straightforward and it’s something that we probably encounter in our daily interaction with our peers.

Another reason, while it might not be that obvious to us, is the Environmental Factors Index which is essentially our carbon footprint, which will have an impact on our health in the future. 

So, while we have easy access to clean water and sanitation, it’s the other environmental aspects that brought down our score for this index.

Material Wellbeing Index

This one should be pretty okay, right?

Well, that’s unfortunate.

We actually performed really well for the Income per Capita and Unemployment Index, even though we may often complain that we’re not getting paid enough or how it’s difficult to find a job.

Putting us in comparison with other countries, we’re earning more on average and have a lower unemployment rate, compared to other countries.

Even though it may seem that our income per capita is outperforming others, this income, however, is not distributed evenly, leading to a lower score for Income Equality Index.

Unfortunately, this brings us back to our earlier point where many low-income individuals need to seek help to cope with their daily expenses.

What do you think about Singapore’s results for the 2019 Global Retirement Index? Does this affect how we should plan for our retirement? 

Got burning questions about retirement planning? Ask them here!