Zurich Pension - CPT / RAP / AMC

What a lot of acronyms, eh?!

I've come across a Zurich pension set up in 1998 that has a weird old charging structure. No AMC currently, but it was set up with a Contribution Payment Term (CPT) of 28 years, and consequently a Reduced Allocation Period (RAP) of 28 months.

For the RAP, only 35% of the regular premiums were invested with the remainder used to cover charges.
Thereafter, for the rest of the CPT, premiums benefit from an enhanced allocation of 105%, somewhat balancing this out (in theory).

In this case, the client has received the same contributions into the plan each month since inception, but will very soon no longer be receiving these due to a change in circumstances, potentially missing out on the rest of the enhanced allocation (another 9 years).

As the premiums haven't changed, I've done a quick calc along the lines of 35%*RAP% + 105%*Not-RAP% which annualises the charge to 3.6% to date (or 0.8% assuming the plan continues to retirement with current contributions) but can I actually quote this figure anywhere? Does it even make sense?

Has anyone had experience with these plans before? And what did you do as far as a charges comparison goes?

Many thanks!

Comments

  • richallumrichallum Administrator
    @Rebecca_Tuck these are old Eagle Star products.  They were designed for clients as sure as possible that they’d keep paying off the full term. The values in the early years are low due to the 35% but the projected values and RIY was very good. 

    I think from memory that the AMC was very low too, well below 1%. The charges that he’s paid have gone but done impact the future. Ideally you’d get a projection but that might not be possible. I’d use the inking AMC (and any policy fee) as the future charge and based my comparison on that and not worry about the RAP or enhanced future allocation. 

    Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern. Republican.

  • richallumrichallum Administrator
    A few typos in that make it rather meaningless!

    So, here goes again. Forget the previous charges. Work out the ongoing charges if he keeps the money with Zurich. That’ll be the AMC plus any policy fee.  Thats the figure that counts. If he starts paying in again and gets the 105% allocation you’ll need to do another calculation taking that into account. Ive done a few of these (ex Eagle Star boy etc) and can help if needed. 

    Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern. Republican.

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