Premier bank account guide
What should you look for in a premier bank account? Or more importantly, do you even need one, given that few of these accounts offer anything which you cannot buy more cheaply elsewhere.
This guide aims to cover the principal features of the premier bank accounts offered by the four main high street banks and to highlight the pros and cons of using one of these accounts.
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What is a premier bank account?
A premier bank account is a fee paying, packaged account which most banks offer to their wealthier customers.
In return for paying a monthly fee, you will be offered a number of extras, typically free travel insurance, motor breakdown cover and 24 hour legal help line. The banks sell these accounts to customers under the pretext that they provide an 'all in' package for busy people, together with a named member of staff ('your relationship manager') who you can call on for financial or tax advice. To qualify, some banks require a minimum monthly deposit of typically £1,000.
There were around 8m fee paying packaged accounts of this sort at the beginning of 2006, according to market research firm, Mintel, generating £874m in fees on these accounts in 2005.
The most popular premier account is Lloyds TSB's Gold Service account, followed by Barclays' Additions account, NatWest's Advantage Gold and HSBC's Bank Account Plus.
Do you really need one?
Few premier accounts offer anything of great value and the monthly fees alone often outweigh the benefits provided, so unless you really want your ego massaged by the thought of having a 'relationship manager' and being labelled a 'mass affluent customer' they are best avoided.
Premier account extras
HSBC Bank Account Plus offers annual family travel insurance with some winter sports cover. There is also a £30 cashback deal if you sign up to BT broadband. Another freebie is free identity theft assistance and a cashback service of up to £100 (compared to the normal supermarket limit of £50). The account also offers commission-free travel money.
NatWest Advantage Gold (part of Royal Bank of Scotland) offers worldwide annual family travel insurance, mobile phone insurance for up to two phones, identity theft cover and accidental death benefit. In addition, this account provides £100 off a £500 holiday and commission-free travel money.
Barclays Additions account is offering six months' free gadget insurance to anyone signing up before 18 October 2006, which it claims is worth £47. The policy provides cover for up to three gadgets, such as your mobile phone, MP3 player and digital camera.
Other features are a debit card allowing up to £300 a day in cash withdrawals, a 24-hour legal helpline, a free will-writing service and Green Flag roadside assistance cover, including Homecall. A children's health cover policy is also available, costing £4 per child, per month.
Lloyds TSB's Gold Service features free annual worldwide travel insurance, for you and a partner, but not other members of your family. Other freebies are mobile phone insurance, AA breakdown cover and Sentinel card protection, which would normally cost £20 a year.
Premier account fees
HSBC Bank Account Plus costs £12.95 a month (reduced to £9.95 for the first six months), with no minimum monthly deposit. Similarly, the NatWest Advantage Gold account just charges £12 a month, whereas Lloyds TSB's Gold Service charges £10 a month (reduced to £7 a month for the first three months).
But Barclays Additions account requires you to deposit at least £1,000 a month and charges £10 a month as well.
Premier account interest payable on credit balances
HSBC Bank Account Plus pays 6.00 per cent gross Annual Effective Rate (AER) for the first year, but only on credit balances up to £2,500. Thereafter, it pays a paltry 0.1per cent, even if you have £100,000 in your account! After the first year, the rate on credit balances falls to 2.5 per cent AER on the first £2,500.
NatWest Advantage Gold is hardly any better, paying 0.25 per cent on all credit balances of whatever size, while Barclays Additions and Lloyds Gold Service Current accounts are the worst, paying a meagre 0.1 per cent on all credit balances.
But with Lloyds TSB, if you agree to deposit £1,000 or more each month and use its internet banking service regularly, it will upgrade you to its Gold Service Plus account which pays 4.00 per cent AER on balances up to £5,000.
Premier account interest chargeable on overdrafts
Going overdrawn on the HSBC Bank Account Plus will cost you 12.8 per cent AER, 3.1 per cent less than HSBC's standard overdraft rate. NatWest Advantage Gold has tiered charges, ranging from 17.14 per cent on up to £1,000, falling to 15.13 per cent AER for overdrafts in excess of £5,000.
Barclays Additions provides a useful £250 free overdraft facility, but over that amount you will be charged 9.9 per cent AER on agreed overdrafts, and an 27.5 per cent AER if you go overdrawn without authorisation.
Lloyds TSB Gold Service offers a £100 interest free overdraft, but if you exceed this amount, you will pay 16.5 per cent on an authorised overdraft, or an eye watering 29.8 per cent AER without prior agreement.
Pros and cons
Critics of premier accounts say they pander to the customers' vanity in that they may make you feel special, but offer little by way of real financial benefit.
If you assess the true value of the freebies on offer, they amount to very little, and once you have taken the monthly fees into account, you would normally be far better off sticking with one of your bank's standard accounts.
Take the Lloyds TSB Gold Service Account which pays a paltry 0.1 per cent on credit balances, however large. The Lloyds TSB Classic Plus account, which like its Gold Service Plus Account, requires a minimum deposit of £1,000 a month, pays 4.00 per cent AER on all credit balances between £1 and £5,000.
The Gold Service Account's overdraft rate of 16.5 per cent is also pretty steep while the free insurance policies are of little value. You can obtain an annual worldwide travel policy for yourself and a partner for less than £100 from insurers like Primary Direct, while AA basic breakdown covers costs only £30.
So unless you particularly want the free insurance cover offered by the Gold Service account, you would probably be better off having your salary paid into a Classic Plus Account and benefiting from a reasonable rate of interest and no monthly account fee.
Barclays Additions account may be attractive to some because of its £250 free overdraft facility, but the 'extras' are worth little. 24 hour legal help lines are offered by most buildings and contents insurance policies and will-writing services are available on the internet from as little as £10 (although it is questionable whether you use a cut price service for something as important as writing your will).
As for Barclays Additions' child health insurance cover, this can be bought for as little as £5 per month from insurers like Norwich Union.
NatWest Advantage Gold's offering is similarly flawed in that commission-free travel money is available from the Post Office, Marks & Spencer, most banks and travel agents. The overdraft rate is pretty high, particularly for small amounts (17.14 per cent on up to £1,000).
Identity theft cover is also of little use after the event and you would be better off investing in a document shredder costing around £25. With interest of only 0.25 per cent on credit balances, this account gives you almost nothing for the £144 you will be paying in annual charges.
HSBC Bank Accounts Plus, is one of the poorest deals of the four accounts analysed in this guide. As already stated above, annual worldwide travel insurance for a couple can be obtained for less than £100 a year. This, together with the £30 cash back on BT broadband, is small recompense for the £155.4 you will be paying annually for the privilege of operating this account.
Is it worth switching to a premier account?
Generally speaking, no, although there may be individuals who like the cachet of having a 'relationship manager' - a euphemism for a bog standard member of staff who will be happy to talk to you and try to flog you more of the bank's financial products and services.
Other private bank accounts
Private banking is big business for the banking industry and most banks offer some form of premier/gold/private banking service to their wealthier customers.
Most of the investment banks in the City, such as JP Morgan, Morgan Stanley, Credit Suisse and UBS offer private banking services. These are usually wealth management offerings whereby the bank will manage your money (usually £100,000 minimum), using external fund managers as well as their own internal funds. These banks rely on client referrals by stockbrokers, independent financial advisers and Sipp providers.
There are also niche private banks, such as Coutts & Co (now part of Royal Bank of Scotland), Bank of Butterfield, Rathbones and Hoare & Co.
These banks are generally the most expensive as they tend to offer a highly personalised service to the seriously rich. You will need a minimum of £0.5m in liquid assets to be considered by Coutts & Co, while HSBC Private Bank requires minimum investment assets of £2m. Some even require a personal recommendation in order for you to be accepted as a customer.
As well as offering normal banking, discretionary and advisory wealth management services, these niche private banks provide dealing and custody services, trust and tax advice, succession planning, foreign exchange and so on.
Private banks are coy about discussing fees. But wealth management services are generally charged on ad valorem basis (as a percentage of the funds under management, (typically 1-2 per cent a year, depending on the size and nature of your portfolio), while advice is charged on a time/cost basis.
For the mega rich, there are 'family offices' - family appointed investment specialists who invest the fortunes of rich dynasties like the Fleming banking family (one of the financial backers of www.find.co.uk) and the Cayzers. Some family offices are willing to invest the assets of non-family members as well.
How to make a complaint if things go wrong
All UK banks are encouraged to subscribe to the voluntary Banking Code of Practice, which sets out minimum standards in banks' dealings with their customers and prospective customers.
It covers requirements to provide you with information to help you choose accounts and to keep you up-to-date with changes in charges and interest rates, on your right to a 14 day cooling-off period, during which time you can change your mind about opening an account without loss. It also limits your loss to maximum of £50 if someone uses your plastic cards without authority.
All UK banks are required to be authorised by the Financial Services Authority and are automatically covered by the Financial Ombudsman Service. The latter has the power to order banks to pay redress of up to £100,000.
The banking code requires subscribers to have in place a formal complaints procedure and access to an independent dispute resolution service.
If you have a complaint, you should take the following steps:
- Keep a copy of all relevant paperwork and notes of telephone conversations
- Write to your relationship manager at the bank setting out your complaint, referring to the Banking Code, where appropriate
- If still not satisfied, write to the bank's complaints department at head office
- If the matter remains unresolved, ask for a 'letter of deadlock' - a letter confirming that the internal complaints procedure has been exhausted
- Write to the Financial Ombudsman Service, South Quay Plaza, 183 Marsh Wall, London E14 9SR, a free-of-charge complaints handling service.
UK banks are also covered by the Financial Services Compensation Scheme (FSCS) which can pay out 100 per cent of the first £2,000 you have deposited and 90 per cent of the next £33,000 (a maximum of £31,700 in total) if you lose money due to the failure of a bank.
Source for all interest rates, Defaqto
Last edited March 2007