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 10

  1. @Maneesh – You are correct in that the plan is expensive. The funds can also be improved upon as the share classes of the assets they offer are not the cheapest available, so the costs are higher on both elements. We can advise you on cheaper alternatives if you would like to know more.

  2. I invested in 2012 and 9 years later I am 15% up. I invested $750 every month for the last 108 months. The problem is not the funds, but that the plan is loaded with high charges so it dampens your returns. The funds themselves of course can be hit or miss, and I only used Zurich managed strategy so I didnt change funds except once

    The fact is that If I had selected an ETF in US and invested $750 for 108 months , my ROI would have been 120%

    I am exiting paying a high surrender charge of $11K (for what?) so if anyone has an experience of being able to lower the charge, please let me know as I am talking to Zurich

    The only good thing on Zurich is that it forces you to invest every month. If anyone is thinking of investing, my advice would be to skip Zurich and instead find a low cost ETF investment and have the discipline to invest every month

  3. @Jay – it’s good you are $80K up on your investment. Depending what your premiums are we expect the surrender value will be much less. We believe the key is to avoid contractual investments altogether as you never know what will happen over the next 20 years.

  4. What a great investment plan for expats. I have been contributing in the Vista for the last 12 years (11 years left) and as of today I am up by approx. $80K on what I have invested. The Vista plan is for the long term and one needs to be patient. The more you have in the pot, the bigger the return over the long run. The key with the vista plan is to be patient especially for the long term investment. For the short term, probably best to look at other plans.

  5. @romolus: I’m paying since 10 years into my Vista plan and 9 out of 10 years the performance was (and still is) in the minus. My advice to everyone: Stay away!

  6. Moderator: If the plan is maturing, by that we assume completing the contractual term that you signed up to, then the proceeds should be available in full. However, depending on your location, you may need tax advice before taking the benefits as such a maturity is potentially taxable”

  7. So i have my plan coming to maturity in October, is there any way i can get my money or any monies out after that,i mean a good chunk of money?, not a few $100, even if i get charger a fee i am willing to do it, as i agree with the above statements, it inst the best plan and much more available with better terms.

  8. I have put my Zurich Vista on hold. It is awful. I am 5k down on the invested amount and it would take another 7k in fees to liquidate. If I keep it ticking over until maturity Zurich will take 8k in fees but there is a possibility the funds may increase in value.
    I doubt I will get my investment back, let alone inflation. You are better off putting cash under the mattress.

  9. The problem with these plans, in my opinion, is their high charging structure and inflexibility because of the long term tie in.
    Don’t get involved, there are much more efficient methods of investing on a regular basis.

  10. 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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