Discovery retirement model can triple investments

26 January 2022 Discovery

The inaugural Discovery Retirement Summit held on 25 January featured an exclusive line-up of global industry leaders sharing insights to help better navigate the complexities and reimagine the future of retirement.

The first person to live to 200 has already been born – and the implications are profound for the retirement industry, says Hylton Kallner, CEO of Discovery Bank.

Speaking at the inaugural Discovery Retirement Summit today – a live hybrid event boasting a line-up of global retirement and behavioural change experts – Kallner stressed that an increasing life expectancy makes it more urgent than ever for South Africans to focus on closing their retirement savings gaps.

Kallner explained the huge value that living healthier brings in extending retirement funding.

“An individual’s healthspan refers to the period of their life spent in good health, free from the chronic diseases and disabilities of ageing. In partnership with global leaders like RAND Corporation, we’re learning to predict which actions individuals can take to extend their healthspan – and then intervene in time to help them action it.”

“This is important because a huge proportion of costs which a person spends on medical care is incurred in the last few years of their life. But if people can remain healthy in retirement, they can extend their funding period, as well as their quality of life,” Kallner said.

According to Discovery Invest, three controllable behaviours – how much you save and preserve for retirement, how long you save for, and how much you drawdown on once you retire – drive savings outcomes. Unfortunately, with over 90% of the population suffering retirement shortfalls, the savings behaviours of most South Africans result in an early depletion of savings and a dependence on family or the state.

The solution to this retirement funding challenge? Shared value, says Kallner.

“If we can incentivise responsible financial behaviours and healthy lifestyles through behavioural incentives, our clients invest more and remain for longer. We earn fees for longer, resulting in greater funds, which generate surplus profits. By sharing these profits with clients through rewards, society also benefits through a stronger savings culture, less reliance on the state, and this ultimately leads to wealthier clients, who can then reinvest and perpetuate the healthy cycle.”

Kallner says the results have been significant.

Discovery Invest data shows a more than threefold increase in additional investments for highly engaged clients, and an increase in their investment term of nearly three years. They also drawdown less in retirement. Kallner notes that to date, the company has paid and accrued over R13 billion through their shared value model.

“It truly is a tangible, qualifiable shared value system that’s good for the client, good for us, and good for society.”

Discovery Invest uses sophisticated tools to enable a unique view of an individual’s financial standing, such as illustrative widgets that show clients the value of positive savings behaviours. The company’s first-of-its-kind retirement modeller is the only tool in the country that accounts for individual longevity in retirement planning.

Discovery Bank clients also have the benefit of detailed financial analysis through the Vitality Money platform, which combines data not just within Discovery but throughout the financial services ecosystem.

“By bringing in all debt sources, insurance products, discretionary and retirement savings and property, we can create a comprehensive and holistic view of an individual’s financial health. We then generate a simple Vitality status that tells them how they’re doing, how to manage their finances and how to be rewarded for it,” says Kallner.

“Our tools work together to generate personalised retirement plans for clients, that are powered by unique health and wealth insights, he concluded. “The net result is a system that is much more sustainable and is based on creating value where it’s so urgently needed, as well as incentives that are completely aligned between the client, Discovery Invest, and more broadly in society.”

The inaugural Discovery Retirement Summit took place on 25 January 2022 and was hosted by BBC journalist Lerato Mbele. It brought together internationally renowned speakers to explore the trends, opportunities and challenges shaping today’s retirement landscape. To find out more about the Discovery Retirement Summit, please click here.

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