Investing/saving with Zurich (via Cornmarket)

dory

[HTML][/HTML]I'm about to give over part of my life savings so I thought I'd better check with some people first...


Basically a person from Cornmarket visited our school and spoke to us all about our options for saving. Told me about three funds Zurich have that often perform well. I chose the medium risk one (but am pretty sure my capital is safe). I'm giving over a small lump sum (less than 10k) and then will be saving with them every month.

There's a 300 euro fee to set this up but apparently the 5% contributions fees doesn't apply if I go through Cornmarket. Was told I can expect about a 6% return but can't be guaranteed obviously. I can't find anything about these three accounts online which bothers me.

Does this all sound normal? Should I have any hesitations? What questions should I ask before handing over the money? I forgot to ask how easy/ hard it is to access the money. I know there's so fee for changing the amount I give each month.

Any advice would be appreciated! Thanks

Liam D Ferguson

As a broker I'm only familiar with the standard Zurich Life products - sometimes Cornmarket have unique versions of products for affinity groups. The standard Zurich Life product is suitable for someone who is willing to invest / save for at least 5 years and be willing to be flexible about their exit date, in case there happens to be a dip in the markets when you want to exit.

I don't think your capital is protected but double-check - maybe Cornmarket have arranged some unique protection.

On the standard product there's a penalty for exiting in the first five years - typically from 5%.

Zurich Life pay Cornmarket commission for setting up this type of plan. Ask your Cornmarket rep how much commission that Cornmarket are getting - both from the monthly contributions and the lump sum. It would be unusual for a broker to charge a fee as well as receive commission. Usually they would be paid by one or the other - not both.

MikeinLucan

Hi dory,

I would avoid investing / saving with any life company, whether it is Zurich or not. There is a government levy of 1% on your monthly contribution, plus tax on the way out of 41% of your growth. In order to achieve your 6% growth per year that cornmarket refer too, you would need circa 11% per year actual return after the charges and tax are taken into account. Unfortunately, no medium risk fund will consistently deliver this for you.

As I'm currently involved in the industry (as is Liam D), I've been advising my clients to initially save with Post Office / Credit Union until you reach a target fund of €10,000. This figure will allow you to invest a lump sum where you will have a lot more options, not including any of the Life insurance companies.

Hope this helps dory,

Mike

Liam D Ferguson

Hi Mike,

I'd agree that it would be wrong to give someone an expectation of getting a 6% annual return from these type of savings plans, net of charges and tax, but I think you're going too far to ignore them altogether.

The alternative is to put money into a regular saver product with a bank or post office. Best rate you'll get for that at the moment is 4% with Nationwide UK (Ireland). The interest on such an account will be subject to DIRT tax at 41% - the same rate as Exit Tax on a life company savings plan. So as the tax is the same on either, what you're comparing is the rate of return.

The Nationwide UK deposit is low risk and has no explicit charges. You can get 4%. Th life company products will typically have charges that amount to about 1.5% per year. So you'd need the fund to do 5.5% per year to match the deposit product. But you should get a higher return to compensate you for the extra risk.

So for the life company savings plan to make sense the would need to be making more than 5.5% per year. If you don't think that this is likely or are not comfortable with the risks, then stick with the deposit savings product. If you're comfortable taking on more risk in return for the potential for a higher return, then go with the life company products.

longhorn2013

Hi mike, sorry for jumping in on this thread but where would you advise investing a lump sum of approx 12,000?