Zurich Vista Savings Plan

A closer look

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    Have you got a Zurich Vista?

    The Zurich International Vista Savings Plan is often recommended to expats by international financial advisers. 

    It's an International Life Assurance Scheme (ILAS).

    If you have a Zurich Vista and would like to make sure it's the most appropriate solution for you, you can have a free, no obligation appraisal with a chartered financial adviser.

    Products like the Vista are often described as a flexible and effective solution for accumulating capital, and long term savings:

    Typical marketed uses:  Features &... ...benefits used to sell the Vista
         
    Retirement savings Dollar cost averaging Minimum premiums
    Saving for children’s education Welcome bonus Free accidental death benefit
    Saving for property investment Ownership Additional life cover benefit
    Saving for children's future marriage expenses Choice of policy term Payment holidays
    Saving to start a business Increase or decrease of premiums Choice of premium frequency
    And many more medium-term financial goals… Wide choice of funds Etc., etc.

    Who is Zurich International?

    Zurich International Life (ZIL) is one of the most well-known international companies in the offshore life insurance industry.

    Zurich was one of the earliest entrants to the industry, establishing operations on the Isle of Man as Eagle Star (International Life) over 25 years ago, before becoming part of the Zurich Financial Services group.

    ZIL’s business model has a strong focus on the Middle East and Far East, including a strong Hong Kong presence.

    In The Middle East alone, Zurich has licensed operations in Abu Dhabi, Bahrain, Sharjah and Dubai, and it holds full authorisation in Hong Kong, Singapore, Sweden and Switzerland.

    In terms of regular premium business, ZIL is a market leader among the offshore insurers. Vista is a unit-linked regular premium plan, marketed by Zurich as a savings vehicle for financial planning purposes such as savings, retirement, and education fees.

    The individual Vista is accompanied by corporate and group pension solutions.

    Zurich is a leading global brand within the insurance industry and has a reputation for strong compliance and consumer support.

    Wide choice of funds (but watch out for the cost)

    ZIL’s range of funds is one of the widest in its sector, with well in excess of 100 funds available to Vista.

    Vista’s investment proposition comprises a number of different fund ranges:

    Low risk funds - these are mainly cash and cash-equivalent funds. But with a 0.75% fee, it is unlikely that the funds will generate sufficient return to cover their fees nowadays, because of low interest rates.

    Managed funds - these are funds that are run for ZIL by external fund managers. These are categorised as Defensive, Cautious, Blue-chip, Performance or Adventurous.They have a high management charge of 1.5% per year.

    Mirror funds - these are structures set up by life insurance companies that allow investors to access another company’s unit trust through their life insurance policies. While this offers the investor a broad range of investment opportunities, these mirror funds are typically expensive, and charges may be hidden or camouflaged and complex.

    The low risk funds available include money market funds, guaranteed accumulation (effectively deposit administration) funds and the dynamic growth funds. Annual management charges are 0.5% for guaranteed accumulation, 0.75% for money market, and 1.8% for dynamic growth.

    Fund choice

    Zurich offers an automatic investment strategy, which is effectively lifestyling, depending on the number of years to maturity.

    This just means the profile of managed funds is gradually switched from higher risk funds to lower risk funds as a plan gradually nears maturity.

    The mirror funds form a range of approximately 100 external funds from selected investment managers, including:

    Aberdeen ABN AMRO
    Allianz Baring
    Blackrock Merrill Lynch Fidelity
    First State HSBC
    JP Morgan Morgan Stanley
    Templeton Threadneedle
    UBS  Etc.

    Mirror funds are controversial; the arguments against them are that they may be more expensive and exhibit lower performance than the funds they mirror. 

    A major drawback is the fact there are also no passive or low cost fund solutions available.

    How does the Zurich Vista measure up against its competitors?

    Using calculations from an offshore projection suite, it is possible to see how Zurich Vista’s charges compare against other similar ILAS products when it comes to projected maturity values. This table shows the results for one example - a 15-year savings plan with a monthly premium of £300.

    Company   Product  Underlying Charge 
    (% p.a)
     Year 15 Value
    Skandia Ireland European Savings/Pension Account  1.5 £75,946
    Friends Provident Intl Guernsey International Pension Plan - £75,767
    Zurich Intl Vista 0* £71,448
    Royal Skandia Managed Pension Account (ROW) 1.5 £71,192
    Skandia Ireland European Pension Account 1.5 £71,192
    Royal Skandia Managed Pension Account (HK Far East Sth America) 1.5 £69,119
    Friends Provident Intl Premier Ultra (ROW) 1.5 £68,890
    Friends Provident Intl Premier 1.5 £67,673
    Hansard Europe Retirement Programme 1.5 £67,350
    Generali Intl Vision 1.5 -
    Hansard Intl Universal Retirement Programme 1.5 £67,271

    *Charges and allocation

    Initial unit charging structure Like many offshore savings plans, Vista has an initial unit charging structure. This means the premiums you pay during an initial period set by Zurich, which is 18 months in the case of the above example, are allocated to so-called initial units which carry an exorbitant extra annual charge of 4% pa.

    Have you paid too much for your Zurich Vista? Could you be better off saved or invested at a lower cost elsewhere? Get answers to all your questions with a free and comprehensive review of ALL your savings, pensions and investments.

    Allocation

    Allocation describes the amount of your premium allocated for the purchase of units, and is often greater than the amount of the premium itself. The percentage of premium allocated to units in the Zurich Vista plans increases with premium size, through Gold, Silver and Bronze bonuses.

    These bonuses are applied to monthly premiums of $750, $1,250 and $2,000 respectively. Taking the example of a 15-year plan, the allocation therefore increases from a basic 100% to 107.5%, 122.5% and 137.5% of your premium for Bronze, Silver and Gold respectively. All units, including initial units, have no bid/offer spread. A summary of the allocation rates and charges on a Vista savings scheme is outlined below.

    Vista savings plan - what does it actually cost? Allocation rates and charges

    Allocation rates:

    Year 1 ($ premium pm)
     $300-$749  100% (basic)
     $750-$1,249  100%+ (0.5% x term) (the bronze bonus)
     $1,250-$1,999  100%+ (1.5% x term) (the silver bonus)
     $2,000 plus  100%+ (2.5% x term) (the gold bonus)
     Year 2 onwards  100% (basic)

    The initial contribution period is 18 months.

    The surrender value of your policy is nothing/zero until the 18 months are up.

    Bid/offer spread:  Nil
     Initial unit / establishment charges:  

    4% pa, deducted monthly. 

    The charge is deducted for the lower of the premium term or 25 years, and is applied for that whole period to the initial units – i..e, the first 18 months’ premiums.

     Additional annual management charge % p.a:  0.75% pa of value of all units
     Additional external / underlying fund charges  0.5% - 2.5%
    Additional policy fee:   $7.50 pm
    Loyalty bonus:  None
     Zurich Vista surrender penalties - what you need to know... The units acquired during the first 18 months (the initial units) have no value until the 18 months are up; the surrender value for this period is therefore nil.

    Paid-up penalties:

    A paid-up plan is a plan into which you've stopped paying premiums, but the plan has not yet been surrendered.

    In the first 18 months, there is no surrender penalty, but the paid up value is nil - which is just semantics.

    Basically, you get nothing back if you cancel your policy within the first 18 months. 

    Thereafter the plan can be made paid-up for a period of up to 3 years without any penalty.

    However...charges continue to apply throughout - which will erode the surrender value. 

    If the paid-up period extends beyond 3 years a surrender penalty then applies.

    Initial units (those acquired during the first 18 months) continue to have no surrender value unless the policy reaches its full term - this means, unless you continue with your plan to its term you effectively lose your first 18 months' premiums.

    Fund switching is free (unlimited).

    The 3 main drawbacks of a Zurich Vista

    Zurich Vista risk factors

    Zurich Vista is recommended by traditional direct salespeople (IFAs) as an ideal savings product for expats who want to save to reach a long-term financial goal. 

    It can also be white labelled (that is: it is a product that other financial institutions can sell with their own logo on, their own product literature relating to the product etc.) 

    Zurich Vista is often sold by banks as well. 

    If your policy is surrendered early you may get back substantially less than you actually invested, and in the first 18 months you will get nothing back.

    As it is a unit linked regular savings plan, Zurich Vista is susceptible to market risks.

    Effective management of the investment strategy and expert guidance of an investment adviser may add considerable mileage to the growth in fund values of the plan.

    It is not intended as a short-term plan.  

    You should not invest in such a plan if you may need the money for short-term financial goals.

    You should not commit to saving a high monthly premium if you are unsure whether you will maintain that level of premium for the duration of the plan, as fees will depend on your initially agreed premium.

    You should not commit to saving for a term longer than you realistically expect to be able to save for.

    These all sound fairly obvious - but you'll be astounded at some of the premiums and terms people are persuaded to sign up for...often to their detriment.

    Further reading to independently inform your decision-making

     


     

    An essential disclaimer - and your next steps

    IMPORTANT NOTE:

    This guide aims to provide general information on the financial product set out above.  It is not intended as personal advice but as a short and simplified summary of a complex subject, and so please do not make any decisions based solely on the contents of this guide in isolation.  

    Whether or not a particular investment is appropriate for you will depend on many factors, including your individual needs, circumstances, approach to risk, and capacity for loss.

    For a personalised analysis of your Zurich Vista request a free portfolio X-Ray Review™ - it will highlight if you can cut costs, improve your returns and how to make the very most of your savings and investments.  It's free and no obligation.

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