VitalityInvest. A mission to create additional value in long-term savings
Whereas it wasn't immediately obvious to us how Vitality thought their well-established proposition in the Protection market would translate into investment, it soon became clear that the innovative approach captured the imagination of Synaptic customers, and some larger firms made it clear that they intended to include the new proposition in their approved investment list.
Justin Taurog, Deputy CEO of VitalityInvest, explained in a recent article some of the philosophy behind the recent launch of the Vitality Invest proposition. Whereas it wasn't immediately obvious to us how Vitality thought their well-established proposition in the Protection market would translate into investment, it soon became clear that the innovative approach captured the imagination of Synaptic customers, and some larger firms made it clear that they intended to include the new proposition in their approved investment list. We then worked with Vitality to ensure that research conducted in Synaptic's Comparator and Analyser tools was capable of capturing the unique 'booster' feature, which is activated on basis of loyalty.
To our minds, the purest execution of the product makes most sense, using the low cost Risk Optimiser fund range, but real flexibility is included through a further selection of actively managed fund choices managed by Investec, and a third level of options offered from an even wider group of fund promoters. Synaptic users can look up the full list of investment options in Product and Fund. (See following tables).
Justin Taurog: "Off the back of the success of the shared value approach of our life and health insurance businesses, and considering the nature of the challenges that face this market, we've identified long-term savings as the next opportunity for innovation built around improving customer outcomes. Hence, the launch of our new business VitalityInvest.
"As you may know, our insurance businesses are underpinned by a shared value model, which has already resonated with over a million Vitality health and life insurance clients."
VitalityInvest is based on the same shared value approach. In the case of Invest, we are encouraging people to save more effectively and look after their health. When they do, we benefit from more funds under management for longer. We are then able to share some of the additional value created with our investors in the form of discounts to fees and boosts to savings. This creates a virtuous cycle that improves client retention, strengthens savings behaviour and creates economic value for clients, advisers, ourselves and society.
Vitality shared value insurance has been adopted in 19 markets around the world, and the model is now impacting over 7 million lives globally. (Vitality internal source, December 31 2017).
About the contract
Extract from Synaptic Contract Fact sheet confirming full complement of product features. Drawdown, full or partial UFPLS are options for retirement.
Out of 20 contract options, we obtained a top ranking for the contract based on some standard criteria:
Our first screen demonstrates how the 'booster' feature can impact costs, when the default VitalityInvest Risk Optimiser fund is selected. Our illustration here is for £100k investment into the VitalityInvest Retirement Plan. Illustration term is for 20 years. Includes Product and Fund charges, but not adviser charges, for illustration purposes.
0.15% R.I.Y. is a very low-cost profile to achieve on a pension investment.
The next screen shows a more conventional open architecture approach, also showing very respectable results in terms of cost and value for money.
The UK long-term savings market has become increasingly advanced and sophisticated, but it still faces a number of challenges stemming from issues like increasing life expectancy and the growing degree of individual responsibility for managing pensions.