Money Insider: The accounts that can add up to a tidy package

 

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The Independent Online

Last week the City Watchdog announced new rules to protect customers who have a packaged or "added value" current account. Under the new proposals those using this breed of current account will get an annual statement to allow them to ensure it is suitable.

Any new customers signing up will be checked to see whether they are eligible for the individual insurance elements within the package of benefits.

This is a sensible move by the Financial Services Authority and should prevent these fee-paying accounts being sold to people who won't make sufficient use of the component parts to make them financially worthwhile. The accounts nearly always receive negative press due to reports of them being sold to customers without their consent or without a full explanation of the benefits. So when the FSA made its announcement last week there was the inevitable outcry from consumer groups tarring all these products as little more than a money-spinner for the banks and a waste of money for account holders.

While I agree that the practice of selling these accounts to customers without checking suitability needs to be stamped out, when it comes down to the value of these accounts, not all products are the same, far from it.

For example the NatWest Select Silver account includes European travel insurance (if aged over 70 you pay an extra £50 per annum), mobile phone insurance (one phone per account holder), ID theft insurance, five music track downloads and three DVD rentals per month – for a total monthly cost of £8.

By comparison you may think the Privilege Premier account from theCo-operative Bank at £13 per month looks expensive, but before dismissing it out of hand, take a look at the package of benefits.

For a start there is a £300 interest and fee-free overdraft facility which can be worth up to £4.50 per month on its own. There is RAC breakdown cover for UK and Europe, worldwide (not just European) multi-trip travel insurance, including cover for volcanic ash situations, up to the age of 79. The mobile phone insurance covers up to four smart phones in the family, plus you have the flexibility of choosing an additional benefit, from Traveller, Gadget or Safeguard options.

It's also worth looking at the individual costs of some of the cover if you were going to buy it from a standalone provider, for example insuring a single iPhone with Vodafone costs £12.99 per month.

While the NatWest account may be more suitable for some, my point is that just because some accounts appear more expensive, the package of benefits can far outweigh cheaper alternatives and the extra £5 per month is good value if you're going to make use of most of the elements on offer.

Junior Isas – what's the incentive?

On Tuesday, the new tax-free children's savings account, namely the Junior Isa (Jisa) was launched.

The new scheme is the replacement for the popular Child Trust Fund initiative. According to the Treasury some six million children will be eligible for a Jisa now, with an estimated 800,000 eligible to join each year thereafter.

Any child under 18 is eligible to open a Jisa as long as they don't already have a Child Trust Fund and can shelter a maximum of £3,600 per annum from the tax man in cash, stocks and shares or a mix of both.

I can't help wondering if there will be much demand for this new tax-free savings vehicle, after all, many families are finding it a challenge just to balance the household budget right now, so finding a bit extra to put in the kid's bank account may not be top priority at the moment.

At least the Child Trust Fund gave new parents an incentive to save for their children's future with a £250 voucher issued when the child was born, plus a further £250 top up when they reached seven years of age, but with the Jisa there's no such carrot. In fact you don't receive a single penny.

It will be interesting to see how many providers eventually launch a cash version of the Jisa or whether they think it's too much hassle for too little reward. As at the official launch Tuesday, there were only seven cash- based accounts available, and not a single offering from the major banks.

There's no doubt that we need to save for our children's future and to encourage them to understand the value of saving but I think the Government needs to offer something more appealing, particularly to incentivise the less well-off families who are unlikely to make much of a dent in a £3,600 annual tax-free allowance.

Andrew Hagger, Moneynet

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