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Financial planning for the 100-year life

Justin Garbutt, VitalityInvest Distribution Director

Updated: 30th December 2020

This site is for UK investment professionals only. If you're not an investment professional, please find out more about us at vitality.co.uk.

People are living longer than ever before

Thanks to developments in medical science and a better understanding of health and wellbeing, reaching 100 years of age looks to be more attainable than ever. Despite news that average life expectancy progress has stopped in the UK1, many of us are still expected to reach the ripe old age of 90 and beyond2, and that brings an extra responsibility for those of us in financial services who need to help people plan better for their retirement.

It is critical that an understanding of an individual’s health and life expectancy should be factored into their financial plan, yet many enter retirement with a very poor idea of how their assets should be converted into income over their remaining years.

Planning for retirement

Research by VitalityInvest of 1,500 adults revealed that nearly half (44%) of UK adults do not think they will have enough money to enjoy their ideal retirement3. Add to this that many people often underestimate their life expectancy and it paints a worrying picture of the lack of realistic, bespoke retirement planning. It is common for people to start from a point of denial, assuming that they won’t live long into old age, while even fewer expect to live to 100 years of age even though one in three of today’s babies will live to 100, according to 2016 estimates4.

Those that do consider it tend to project on the basis of a ‘bare bones’ retirement, not their ideal one. Even more worrying, those clients who are already engaging with planning for retirement tend to be the more financially literate. So how many people across the UK have no plan at all or intend to rely on the state - a state that appears to be systematically scaling back their commitment to old age retirement provision as the UK population ages?

People need to be incentivised to save more and earlier

This is especially true for the younger generation who, in the VitalityInvest survey, were relatively disinterested about their prospects: only 39% of people aged under 35 thought that securing an adequate income in retirement might be a problem.

Looking at the behaviours that effect retirement saving, there is a danger of consumers misunderstanding risk and the nature of investing. As a consequence, many adopt the attitude that it’s so far in the future they can worry about it tomorrow, or believe they can asset-pick their way to a quick win using speculative headline-grabbing vehicles like Bitcoin.

There’s no immediate incentive to save early. And this mind-set may be further entrenched by a lack of trust in traditional financial services products to deliver one day in the future.

How VitalityInvest can help

Vitality wants to do something today to deliver on people’s ambitions and to make sure savers stay invested. We believe a desirable retirement depends on a combination of having enough money to stop work, while maintaining your standard of living, and crucially having the good health to fully enjoy it. Getting there depends on having a decent level of savings invested for long enough to reap the rewards offered by compounded growth.

Moreover, we believe that successful long-term financial planning needs to encompass both financial and physical wellbeing, and so VitalityInvest offers discounts and behavioural nudges that incentivise clients to invest for longer and look after their health. We believe this is a game-changer for many who will live far longer than they may expect.

In our model, when people look after their health, we charge them less to invest. This gives their money an even better chance to grow, helping them reach their financial goals faster, as well as stay healthy for longer. The types of behaviour this encourages is consistent with improved long-term outcomes. At the same time, it creates value for Vitality (and its advisers) and allows us to share some of this additional value with our investors in the form of our discounts.

In addition, the rewards we offer clients, from discounts on coffee, running shoes and hotels with Expedia, keep them constantly engaged with both their health and their financial situation.


The 100-year life doesn’t need to be a financial planning headache. It is a realistic goal and we really do have the tools to help clients get there in great physical and financial shape.

The 100 year life roundtable

Watch Justin Cash and a panel of experts including VitalityInvest’s Justin Garbutt, discuss the growing issue of ensuring clients have enough money to see them through the whole of their retirement and what investment strategies are best for decumulation clients.
Watch now

Sources

  1. BBC - BBC news
  2. NHS - UK life expectancy expected to rise to late 80s by 2030, April 2015
  3. Vitality commissioned research, Opinium, September 2018
  4. ONS - national population projections
  5. ONS - UK government debt deficit, March 2018

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