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Helping savers to live longer, healthier, more financially secure lives

JUSTIN TAUROG
MANAGING DIRECTOR, SALES & DISTRIBUTION

Published: 11/07/2018

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.

Rather than indulging today, isn’t it time we began taking a longer-term approach to our money and wellbeing? We believe we may have the solution.

Planning for the long-term challenges all of us: we are, after all, genetically “programmed” to prioritise short-term gratification over distant, unpredictable outcomes. What’s more, in today’s consumption-oriented, one-click shopping society, evidence suggests that the challenge has never been greater. For instance, the Institute for Fiscal Studies found that while median incomes have been steadily increasing (in real terms) over the past 50 years, saving by people born in the 1970s is significantly less than those born in the 1940s, at equivalent ages1.

It’s not only in savings where people struggle to plan for the future. Despite the well-documented impact on our long-term health of a sedentary lifestyle, unhealthy food, tobacco and alcohol, people continue to neglect exercise, eat badly, smoke and drink.

Fortunately, there is convincing evidence from behavioural science that it is possible to change even entrenched habits by applying the right incentives. When it comes to helping people plan for the future, we need to encourage behaviours that promote long-term financial security and physical wellbeing. Tackling these demands is what led us to create VitalityInvest.

“We need to encourage behaviours that promote long-term financial security and physical wellbeing.”

VitalityInvest is a new investment range based on our proven, well-established and widely endorsed shared value business model. When clients make positive changes to their behaviour, economic value is generated which can be shared with our clients. We plough back some of this additional value in the form of incentives and rewards to entrench the positive changes. Clients benefit from better long-term outcomes, while their advisers and Vitality enjoy improved client retention.

In the area of long-term saving, we aim to get clients to save sooner, save more, save for longer, manage their income sustainably in retirement and help them maintain a level of health that enables them to enjoy the fruits of their savings. The last point is critical: we strongly believe that financial security without physical wellbeing is an incomplete outcome for savers.

To achieve that shift in behaviour, our investment products include three unique features. The Investment Booster encourages people to start saving sooner and stay invested for longer, by providing regular top-ups to their capital – on top of any growth – that can boost their savings by up to an extra 15% over 25 years. The Healthy Living Discount encourages people to take better care of their health, by discounting the product fee to as little as zero (provided the client holds an eligible VitalityHealth or VitalityLife policy). The Retirement Booster gives back up to 50% of any income drawn in retirement, depending on how much they draw down and the extent to which clients engage in looking after their health. To highlight the considerable benefits these features can make to a person’s pension pot over the long term, we’ve also created the LiveWell Financial Planner, a tool that advisers can use with their clients. The tool produces personalised projections of life expectancy, and enables clients to assess how changing their lifestyle can influence their expected longevity and the consequent sufficiency of their savings. It also shows how Vitality’s boosts and discounts can help their retirement income go further.

These distinctive innovations all go to the heart of tackling the long-term challenge of how to overcome our inherent short-term biases and successfully provide for our future wealth and health. We think this could herald the start of a fundamental shift in how people prepare for retirement.

Source
1. Institute for Fiscal Studies, The economic circumstances of cohorts born between the 1940s and the 1970s, Andrew Hood and Robert Joyce, December 2013

For investment professionals only. VitalityInvest is a trading name of Vitality Corporate Services Limited. Vitality Corporate Services Limited is authorised and regulated by the Financial Conduct Authority.