What is the Zurich Vista Savings Plan?

Have you got a Zurich Vista?

The Zurich International Vista Savings Plan from Zurich International Life Limited 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 Life Limited?

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 those in the table here.

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.

Allocation rates and charges

Vista savings plan - what does it actually cost?

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

1. High costs

Offshore savings and pension plans such as the Zurich Vista cost as much as 9% per year for the first 18 months, dropping to roughly 4% per year thereafter.

This is in large part because a lot of the money you agree to save is paid in commission to the salesperson who convinces you to start the plan. In broad terms, the market average for this type of plan is around 4.5% of the total amount you contract to save over the entire plan (whether you save it or not).

2. Low flexibility

The technical name for this type of product is a maximum investment plan; in many ways it is similar to an endowment plan.

The structure means that if you stop paying into the plan the charging structure keeps on incrementally increasing based on the originally agreed monthly premiums.

In effect this means the charges are applied on every premium - whether your pay the premium or not.

This can wipe out any returns and savings if you need to take a break or decrease your premiums.

3. Lack of service

The commission paid to the salesperson for selling this type of policy is usually paid on the very first day you start the policy.

This is called ‘indemnified commission’, and in many cases means you are unlikely to receive a good level of ongoing service (or any service) with regard to this policy - because there is no incentive for the salesperson to bother continuing to help you. They've already been paid up front...

In effect you are paying up front for service over the full length of the policy, rather than on a pay as you go basis - i.e., how you pay a fee-based financial adviser.

So, there is no expectation of a fee to incentivise service from the salesperson: he’s been paid whether or not you get the service!

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.

To independently inform your decision-making

Costs in the Mists of Time: South China Morning Post
Hong Kong Consumers Angry After Being Sold Complex Insurance Product ILAS: South China Morning Post
ILAS Products Under Scrutiny: International Adviser
The Real Cost of an Offshore Pension Plan: Noto Financial Planning

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.

Zurich Vista
Savings Plan

A closer look at Zurich International Life Limited's Vista.