Zurich Vista Savings Plan

The Zurich Vista Savings Plan is similar to many contractual savings plans that are sold by commission only salespeople in the offshore financial services industry.

Zurich Vista Plan

Many people are looking for a disciplined approach to savings on a monthly basis, either to supplement retirement income or to fund school fees, house purchase etc. The Zurich Vista Savings Plan is one of the more popular plans, but is this because of the benefits to the client or the commission to the adviser?

Cancellation in the first 18 months will result in a total loss and hefty losses occur on early termination. The first 18 months contributions are always lost if the plan does not reach maturity

Let’s look at the fees of the Zurich Vista Plan

Establishment Charge-

This is 4% pa that is deducted monthly during the initial period. The initial period is 18 months. This 4% fee continues to be deducted at the start of each month until the policy matures or the 25th anniversary- whichever is earlier.

Monthly Fee – There is a $8.50 monthly policy fee

Policy Management Charge- This is 0.75% pa, applied monthly on the value of the fund

Underlying fund fees –  Can be between 0.35% to 3% pa

Let’s consider the establishment charge on the Zurich Vista Plan

Assume someone takes out a 20 year plan at 1,000 USD per month. That equates to 18,000 USD in the first 18 months and 4% of this is $720.

In the early years, this is a hefty drag on performance. By year 5 if we assume fund fees of about 1.75% and policy management fees of 0.75% and policy fee of 0.85% ($8.5 a month) as well as the 4% fee paid based on the first 18 months we can try and make some assumptions of the cost. If ongoing advice at 1% pa is required, this must also be taken into account.

Example

Assume a 6%pa  investment return at $1,000 contribution per month over 5 years-

  1. Low cost platform with no initial fees and lock in penalties.

$66,520 (based on 2% total fees- incl advice, platform and low cost funds)

  1. Zurich Vista Savings Plan

$56,700 (estimated using fees above . Return less than the contributions paid)

But, the client in the first example can access the $66,520 without charge- in full.

The client in the second example will lose a large chunk of the $56,700 in surrender fees.

 

Zurich Vista Savings Plan- long term

Due to the  complex charging structures applied, it is difficult to predict the effects on returns but the fees are going to be broadly 4.5% pa

If we look at the examples above, over 20 years, then the estimated fund at 6% pa growth ( assuming the same investment funds*)

  1. Low cost platform with no initial fees and lock in penalties.

$368,000 (based on 2% total fees- incl advice, platform and low cost funds)

  1. Zurich Vista Savings Plan

$280,000 (estimated on fees above)

 

The difference is substantial and, remember, there will always be a surrender fee up to the date of maturity of the Zurich Vista Plan.

* Low cost platforms use clean funds and the fund fees are much less expensive than the same funds in an insurance product.

Other commentators have also raised the issue of the cost of such plans.

 

 

(NB- This is based upon our understanding of the charges based upon information in the public domain. If there are any errors or omissions, we would be happy to acknowledge them and will alter the review accordingly)

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

This article was published on 23rd February 2017

 

 

Comments 1

  1. If you are not comfortable choosing your an investment strategy on our own,  you can appoint an investment adviser to provide investment advice, and or to manage your investment to help you achieve your financial goal. Since Zurich Vista is a regular savings plan or a Systematic investment plan, it enables efficient dollar cost averaging, thus helping you benefit even when the markets are falling.

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