VitalityInvest 4 June 2019 1
UK COMPOSITE MODEL 2
Vitality is the largest behavioural platform in the world Impacting an Partnering with Paving the way increasing number of leading international through intellectual lives globally insurers leadership 19 markets 17.8m lives Pledge Successful launch into 100m 20% 2025 by Japanese and South Korean markets people more active Source: Discovery internal data, Sep 2018 3 3
Extending the Vitality platform to investments 4
The challenges facing the investment market 1 People are living longer 2 People are not saving enough in today’s environment 3 Existing products are not addressing the issues in society today How do we live healthier and fund a longer retirement? 5
Opportunity presented by the UK investment market • Generalist • Personal pensions £180bn • Wealth specialist • Stocks & Shares ISAs • Protection specialist • Junior ISAs • High net worth • Large FA • Pensions consolidator £42bn £29bn £13bn Total market Our contestable market Key segments (4,396 firms) Existing supporters (11,245 firms) 6
Increased distribution footprint Expanded distribution support New initiatives to support VitalityInvest 6 Invest Specialists and Technical experts • Help with complexities of legislation, Over 200 UK-wide Business tax rules, trusts, pension transfers Consultants and crystallisation events • Largest distribution footprint in the UK • Help navigate our products and funds • Face-to-face, telephonically or online 30 Wealth Business Consultants • Dedicated support focused 24 Regional Teams on Invest products • Wide geographic coverage throughout the UK Dedicated service consultants • Provide real-time updates on new business and pension transfers • Help with servicing issues • 1 st point of contact for adviser hub support 7
The rationale for VitalityInvest 8
Key trends shaping the agenda on long term savings and retirement Increased choice Increased sophistication Reduced costs Asset weighted Fund innovation Authorised funds expense ratios 3,458 Increased use of DFM Risk 2010s 2010s profiled Rise of funds passive investing Hedge funds and absolute 2000s return 2000s funds “Modern” mixed asset funds Thematic bond 1990s 1990s funds 493 Increased choice at Thematic equity reducing costs funds Traditional 1980s managed 1980s 1980 2018 1990 1995 2000 2005 2010 2015 2017 funds Sources: Investment Association, Morningstar Inc 9
Key trends shaping the agenda on long term savings and retirement Increasing life expectancy Increasing life expectancy Increasing years spent in from birth in retirement poor health 80 +4 Years 19 +2.5 Years +0.2 Years 16.5 from 2003 from 2003 added every year 18.5 79 16 18 78 17.5 15.5 77 17 15 16.5 76 16 People are living 14.5 75 longer, but also 15.5 longer in poor 74 14 15 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 health 2003 2005 2007 2009 2011 2013 2015 Source: Office of National Statistics 10
Key trends shaping the agenda on long term savings and retirement Shifts from DB to DC Significantly lower savings schemes into DC schemes Active membership of private Average contribution rates sector occupational pension by scheme type 25 schemes Total contributions - % of salary 20 10 Millions 8 15 6 4 10 2 - DC members are 5 saving less than 0 half of DB 2012 2013 2014 2015 2016 DB DC DB DC contribution rates Sources: Office for National Statistics, PPF Purple Book 11
Key trends shaping the agenda on long term savings and retirement Yet, financial planning tools still take a blunt Technology is driving approach to incorporating life expectancy increasing personalisation Recommendatio Smart voice assistants n algorithms Targeted advertising Wearable devices Technology has not been applied to Real-time navigation individual life expectancy 12
A behavioural platform to incentivise positive health and savings behaviours UP TO UP TO AS LOW AS 15 % ZERO 50 % CHARGE BOOST BOOST SAVE SOONER, MANAGE HEALTH BEHAVIOURAL STAY WELLNESS MORE AND FOR AND WEALTH IN HEALTHY PLATFORM LONGER RETIREMENT 13 13
The Investment Booster – Save sooner, more and for longer Get a boost of up to 15% to your savings, including growth, at no extra cost Years Boost Cumulative boosts • Receive a boost to money invested in Vitality funds, every 5 years 5 2% 2% • Boosts compound over time 10 2.5% 4.5% • Future contributions will also receive boosts every 5 years 15 3% 7.7% 20 3.5% 11.1% 25 4% 15.9% 30 4% 21% 14
The Healthy Living Discount – Stay healthy Get a product charge of zero if you take care of your health Charge structure • Pay a discounted product Investment charge, based on Vitality No Vitality Bronze Silver Gold Platinum status, for money invested in Vitality funds <£30k 0.5% 0.5% 0.4% 0.25% 0% £30-75k 0.4% 0.4% 0.3% 0.2% 0% £75-250k 0.3% 0.3% 0.25% 0.15% 0% £250k-500k 0.2% 0.2% 0.15% 0.1% 0% £500k+ 0.15% 0.15% 0.1% 0.05% 0% 15
The Retirement Booster – Manage health and wealth in retirement Get a boost of up to 50% of income drawn, based on Vitality status and level of drawdown Boost as proportion of income taken Withdrawal prior year • Annual boost based on amount of income Bronze Silver Gold Platinum draw down and Vitality status 0 - ≤1% 10% 20% 40% 50% • The boost is applied to money invested in 1 - ≤2% 7.5% 15% 25% 35% Vitality funds • Free-standing Vitality is available in 2 - ≤3% 6% 12.5% 15% 20% drawdown 3 - ≤4% 4% 7.5% 12.5% 15% 4 - ≤5% 0% 5% 10% 12.5% 5 - ≤6% 0% 2.5% 5% 7.5% 6 - ≤7% 0% 0% 2.5% 5% 7 - ≤8% 0% 0% 0% 2.5% >8% 0% 0% 0% 0% 16
Combined these unique benefits can extend your retirement income by over 10 years Additional years’ income Vitality status £600k Boosted fund from Investment Booster No Vitality 0 years and Healthy Living Discount Bronze 4 years £500k Silver 5 years Gold 7 years Platinum 12 years £400k Longer lasting income due to Retirement Booster and £300k Healthy Living Discount £200k Longer lasting income due to Retirement Income Booster and Healthy Living Discount £100k 40 45 50 55 60 65 70 75 80 85 90 95 100 Assumptions: Initial investment at age 40: £100k; Regular contributions: £6k p.a. (incl. tax relief); Retirement age: 65; Takes 25% as a tax-free lump sum; Draws £2k a month until pot runs out; Holds eligible policy and maintains Vitality status throughout; Annual growth = 4% 17
A sophisticated product construct underpinned by technology and leading asset managers UP TO AS LOW AS UP TO 15 % ZERO 50 % BOOST CHARGE BOOST BEHAVIOURAL MANAGE SAVE SOONER, MORE STAY WELLNESS HEALTH AND WEALTH AND FOR LONGER HEALTHY IN RETIREMENT PLATFORM RETIREMENT PLAN PRODUCTS S&S ISA JUNIOR ISA Accumulation and drawdown TECHNOLOGY PERSONALISED PERSONALISED ADVISER PLATFORM LIFE EXPECTANCY SAVINGS ROADMAP HUB ASSET VITALITY FUNDS MANAGEMENT THIRD PARTY FUNDS 18
Our Vitality Risk Optimiser funds – An industry leading range of risk-targeted funds Dynamic Planner gold standard rated funds Spans risk levels 3 to 7 Risk-targeting verified by Dynamic Planner as meeting their requirements for gold standard funds Adviser peace of mind Constant risk-targeting means no drift in fund risk level as market conditions change Multi-asset risk-targeted funds with active portfolio construction Index-tracking building blocks covering a wide range of asset classes Liquid asset class exposure Each fund combines liquid, diversified components to ensure easy investment and access Ratings provided by Dynamic Planner, Dec 2018 19 19
5-year performance of VIRO funds against IA peer group VIRO5 vs. Mixed Investment 20-60% shares VIRO6 vs. Mixed Investment 40-85% shares £1,550 £1,650 £1,550 £1,450 Risk Optimiser Risk Optimiser simulated past performance* simulated past performance* £1,450 £1,350 £1,350 £1,250 £1,250 £1,150 £1,150 £1,050 £1,050 £950 £950 £850 £850 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018 Jan 2019 VitalityInvest Risk Optimiser 5 IA Mixed Investment 40-85% Shares VitalityInvest Risk Optimiser 6 IA Mixed Investment 40-85% Shares * Simulated past performance has been constructed using historical asset allocations provided by Dynamic Planner with the same asset classes and underlying holdings in which the funds are currently invested. Daily rebalancing to the historical asset allocations has been applied. The simulated past performance is reported net of current fees. Source of data for underlying holdings: Morningstar Ignores the impact of the Investment Boost 20
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