Defaqto

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,’ such as free travel insurance, motor breakdown cover and 24 hour legal help lines.

The banks sell these accounts to customers claiming that they provide an ‘all in’ package for busy people, together with a named member of staff (‘your relationship manager’) on whom you can call for financial or tax advice. 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. Mintel does not have any more up to date figures but the chances are that the number of premier bank account holders has increased, rather than decreased since then.

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 need one?

The freebies offered with premier bank accounts are always of great value and the monthly fees can exceed the value of 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,’ it may not be worth the £10 a month fee.

That said, some customers like the idea of having a relationship manager to whom they can turn to for advice and to have someone who can help in an emergency.

For instance, if you need a personal loan arranged quickly, you may be able to get this turned around more quickly if you are premier account holder , than if you are just a standard bank customer.

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, the account provides £100 off a £500 holiday and commission-free travel money.

Barclays Additions account provides 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 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

Premier bank accounts tend to pay a reasonable rate of interest on at least part of any credit balance but terms and conditions vary widely, so use the Defaqto current account Compare tool to see which bank offers the best deal.

Premier account interest chargeable on overdrafts

A number of premier accounts provide an interest free overdraft buffer of typically £100-£250 and a variety of authorised overdraft rates thereafter. Use the Defaqto current account Compare tool to find the most competitive rates.

Pros and cons

Critics of premier accounts say they pander to customers’ vanity in that they aim 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 can amount to very little, and once you have taken the monthly fees into account, you would normally be better off  financially sticking with one of your bank’s standard accounts.

Take the Lloyds TSB Gold Service Account which charges a £10 monthly fee and the Lloyds TSB Classic Plus current account (with no monthly fee). They are identical in all respects apart from the former charging slightly less on unauthorised overdrafts, providing a £100 interest free overdraft, and free travel insurance.

With the £120 annual fee, which would more than pay for the free travel insurance, it is hard to see how the Gold Service customer is substantially better off.

Similarly, with the Barclays Additions account which may be attractive to some customers because of its £250 free overdraft facility and its authorised overdraft rate of 9.9 per cent, but in all other respects (apart from the freebies), it has the same features as a bog standard Barclays bank account.

The freebies include a 24 hour legal help line (which come as standard with most buildings and contents insurance policies) and an online will-writing service for £10. which is of dubious value to premier account holders who are unlikely to want to use a cut price service for something as important as writing a will.

The child health insurance cover can be bought for as little as £5 per month from insurers like Norwich Union.

NatWest Advantage Gold account offers commission-free travel money which anyone can obtain at the Post Office and Marks & Spencer. The overdraft rate is pretty high, particularly for small amounts (18.59 per cent and only 1.49 per cent less than a standard NatWest current account would charge).

Identity theft cover is also of little use after the event and you would be better off investing in a document shredder costing around £20. 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. Annual worldwide travel insurance for a couple can be obtained for as little as £65 a year. This, together with the £30 cash back on BT broadband, is small recompense for the £155.40 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’ and might need specialist services, for which as a premier account holder you may be eligible or on which get a faster turnaround..

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, 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 for the super wealthy, 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 investable 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 even help with domestic issues.

Private banks are naturally 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 Flemings and the Cayzers. Some family offices are willing to invest the assets of non-family members as well.

How to make a complain

Protection

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.

All banks operating in the UK are required to be authorised by the Financial Services Authority and most subscribe to the Financial Ombudsman Service. The latter has the power to order banks to pay redress of up to £100,000 in compensation.

If you have a complaint:

• 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
• The bank has eight weeks in which to resolve the dispute
• If unresolved you can apply to the Financial Ombudsman Service, South Quay Plaza, 183 Marsh Wall, London E14 9SR, which runs a free-of-charge complaints handling service.

Compensation cover

UK authorised banks are covered by the Financial Services Compensation Scheme (FSCS) which will pay out 100 per cent of the first £35,000 you lose, in the event that a UK authorized bank goes bust.