Italy is among the 30 best countries to stop working and retire

The time has come to stop working and retire: which country to choose for retirement? Natixis IM compiles its Global Retirement Index (GRI) to identify the countries with the best retirement security in the world, recording, for the first time in ten years, a general improvement in conditions for those retiring. Strange but true: in Italy, as pensioners, you are not so bad off.

Which country is it best to retire in

On the podium, the best countries for pensioners are Norway, Switzerland and Iceland, with scores of 83, 82 and 81 out of 100. Ireland follows with 80 points and Luxembourg, the Netherlands, Australia, New Zealand and Denmark complete the top ten. Enter Germany, with 76 points out of 100.

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But how is the pension security of the world's countries rated according to the Natixis index? The parameters incorporate a wide variety of factors essential for enjoying a healthy and secure retirement, including financial factors, access to and cost of healthcare, climatic conditions, governance and the general happiness of the population.

“The common performance factors that contributed to the ranking are rising interest rates, improving employment levels and environmental progress,” comments Marco Barindelli, Head of Italy at Natixis IM. - As economies recovered from the global pandemic, employment rose sharply, but inflation also forced central banks to raise rates to maintain stability. Environmental advances have also played a crucial role in driving positive changes in some countries, which have adopted sustainable practices and invested in clean energy initiatives, especially following the Russian invasion of Ukraine."

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Italy in the top 30 for pensioners

This year, Italy enters the top 30 of the ranking, moving from 31st to 28th place. The country's best results are recorded in the sub-indices Quality of Life and Health, where it ranks 20th and 21st respectively.

For the second year in a row, Italy ranks 20th in the quality of life rankings. The country improves in the area of water and sanitation, where it moves from 14th to 11th place with a 10% increase in the specific score. More generally, the picture is more mixed for the other quality of life factors. While air quality rises this year from 26th to 24th place, the country declines in terms of happiness (27th from 24th) and biodiversity and habitat (24th from 21st).

Italy's position in the health sub-index slips slightly from 20th place last year to 21st. Driving the change is the decline in life expectancy, which sees Italy drop out of the top 10, slipping from 6th place in 2022 to 11th. This is probably attributable to the impact of the pandemic that hit the country hard. The rankings for health expenditure per capita and insured health expenditure remain unchanged, at 22nd and 27th place respectively.

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Italy ranks 35th in material well-being for the third consecutive year and sees a slight increase in the score of three percentage points. While the ranking of income equality remains stable (26th), that of per capita income rises from 22nd to 20th place, despite a slight decrease in the score. Italy remains in the bottom 10 on the unemployment front, but shows a marginal year-on-year improvement.

In the Finance sub-index, Italy maintains the same score as last year, but sees its position drop from 35th to 40th place. While many countries experience a change in the inflation indicator, Italy records one of the most significant declines, dropping 27 places in the ranking this year. More positively, the country recorded marginal improvements in several factors, including interest rates (14th from 16th), bank non-performing loans (36th from 39th), governance (34th from 35th) and public debt (41st from 42nd).

The retirement challenges of the future

Despite the improved macro picture and the general increase in pension security, many concerns remain for future pensioners. In particular, the challenges of the future are represented by:

Inflation

Although it is declining, in the last year we have learnt how fast and how high prices can rise in a short period of time. Rising everyday prices are the main financial fear for 73% of retirees and 60% of workers, and 83% of working-age investors stated that the recent inflationary environment reminds them how inflation is a serious threat to their retirement security, a sentiment shared by 80% of respondents who have already retired.

Interest rates

Investors around the world count rising interest rates among their top investment concerns, but only 2% of the 8,550 individual investors surveyed correctly identified what a rising rate environment means for their investments. For pensioners, the rise in interest rates should be good news, as it creates more favourable conditions for generating a steady income from their retirement savings and increases the ability of bonds to provide risk limitation in portfolio construction. However, few understand what rising rates mean for their investments and less than a quarter (22%) say that rising rates have led them to add bonds to their portfolios.

Public Debt

Three financial crises in the last two decades have forced policymakers to issue substantial levels of public debt to finance recovery programmes. 77% of active investors and 73% of pensioners fear that their country's high levels of public debt could lead to a reduction in pension benefits.

Demography

The ageing of the world's population poses a challenge, as larger and older populations put pressure on the traditional way of thinking about pensions. There are already visible consequences, such as the shift from defined-benefit to defined-contribution pension schemes, as policymakers try to manage the increased demand for financial support.

High expectations and wrong assumptions

Many individuals have no idea how long they will live once they retire, which can mean an underestimation of how much is needed to ensure a financially secure retirement. Investors also overestimate the returns they will receive from their investments, assuming returns of 12.8% above inflation in the long run on average. This figure is significantly higher than the 9% above-inflation returns that global financial advisors expect from investments.