Being a "senior citizen" has at least one benefit from a financial point of view and that is discount banking. Most banks have special packages for clients over the age of 55. While these packages do offer seniors substantial savings, there's no such thing as free banking.
If there is one topic of conversation that is likely to get people hot and bothered, it is bank charges. South Africans are highly dissatisfied with the fees and charges levied by our banks.
A joint investigation by the National Treasury and the South African Reserve Bank last year found that fees charged by local banks were among the highest in the world - some local bank charges were more than 150 percent higher than those in any other country.
The banking industry in South Africa is dominated by four large institutions - Absa, First National Bank (FNB), Nedbank and Standard Bank. The dominance of the "Big Four" has caught the attention of the Competition Commission, which is planning a preliminary investigation into bank fees and other issues relating to competition.
In addition to paying steep bank charges, senior citizens have to contend with interest rates that are at historic lows. The prime lending rate dropped from 17 percent in September 2002, to its current level of 10.5 percent in April, decimating the interest income of senior citizens.
Every cent counts when you have retired and are living on a pension, and it is worth taking advantage of discounts and special packages on offer.
You need to be 55 years old to qualify for either a seniors' cheque account or seniors' savings account at Absa, FNB or Nedbank. To qualify for a seniors' account at Standard Bank, you need to be 60. However, Keith Fuller, the director of transaction products at Standard Bank, says the 60-year age criterion is under review.
The discounts for seniors vary between banks, and exactly how much you will save in bank charges will depend on the account package from which you move, as well as how you normally do your banking - whether you bank over the counter or use electronic channels such as ATMs, the telephone or the internet.
Banks typically have a range of cheque account packages, from the bottom-of-the-range package offering limited benefits and cheaper charges, to the top-of-the-range package offering the most benefits and the cheapest charges. Perversely, those with the most assets and highest income qualify for the cheapest banking.
If you are on the top-of-the-range cheque account package when you become eligible for a seniors' package, your banking transactions could become less costly if you were to move to a package for seniors.
Nigel Walker, the group consultant of pricing, group marketing and communications at Absa, says senior clients can save up to 80 or 90 percent on their day-to-day transaction fees, depending on how they currently do their banking. This view is shared by Brett Erasmus, FNB's marketing manager for seniors.
Bryan Mclachlan, the head of transactional and investment products at Nedbank, says the amount you can save will vary widely, as it depends on the typical mix and number of transactions that you carry out.
But depending on the transactions involved, you could save 50 percent or more.
The rebate option
In terms of the rebate fee option, which is offered by the big banks on cheque and savings accounts, you get a limited number of free transactions and a rebate on the fees you would normally pay, if you maintain a specified balance in your account throughout the month.
Alternatively, you may be required to invest a specified amount in one of your bank's investment accounts to qualify for the rebate fee option.
Some banks, such as FNB and Standard Bank, offer seniors more than one pricing option on their cheque accounts. At FNB, you have three choices:
1. A fixed monthly fee option, which costs R75 a month for 35 transactions; or
2. A rebate fee option offering discounted transaction fees if you maintain a minimum balance of R5 000 in the bank's Encore cheque account; or
3. A rebate fee option with discounted transaction fees if you invest R10 000 or more in any of FNB's investment products.
The discounted transaction fees that apply options two and three are those that are shown in the table entitled Savings and credit accounts for seniors. At Standard Bank, seniors are also given the choice of three discounted bank account fee structures.
These structures are:
- Pay as you transact in which you pay a fixed base fee of R2.25 plus a percentage of the transaction value (the percentage depends on the type of transaction); or
- The Plus option, which gives you 53 transactions for a fixed monthly fee of R31. The fee is waived if you maintain a minimum balance in your account of R6 500 in the bank's seniors cheque account package, the Consolidator account; or
- A rebate banking option in which most, but not all fees are waived if you maintain a minimum balance of R6 500.
The transaction charges that apply in the rebate banking options are listed in the table entitled Rebates on cheque accounts for Seniors.
Unlike FNB and Standard Bank, Absa and Nedbank offer seniors only a rebate fee option. At Absa, seniors qualify for a rebate on certain charges on the bank's Silver or Gold current account if you invest R20 000 in any of the bank's following investments: the 12- to 18-month bonus deposit, fixed deposits for 12 months or longer, linked rate deposits, the money market unit trust or MoneyBuilder bank account.
At Nedbank, most of your transactions are rebated if you invest a minimum of R10 000 in a Nedbank fixed or notice deposit.
Discounted fees also apply to savings accounts offered by the big banks. FNB does not offer a specific savings account for seniors.
Bear in mind that a savings account - despite discounted fees is not generally the best place to save money because the interest rates are relatively low. When investing money, you should shop around.
How to get the benefits
Not all banks will contact you to inform you of the special packages for which you qualify when you turn 55 or 60.
Standard Bank customers who qualify for the bank's package for seniors, the Consolidator account/package, are moved to the account at their request, Fuller says.
The reason is twofold, he says. Clients become accustomed to the features and benefits of an account package that they have been using for a long time and do not like to change.
For instance, in terms of some Standard Bank packages, clients have access to relationship managers and personal bankers.
The Consolidator option does not offer such features and, as a result, some clients may find it difficult to adapt to the package. However, Fuller says, branch managers and telephone consultants are available to Consolidator clients.
Secondly, he says, not all clients are concerned about costs and prefer to remain on the package with which they have become comfortable.
Twice a year, Standard Bank clients are sent a booklet of pricing options. It details all the features, benefits, transaction costs and service fees for all the bank's current accounts. Clients are therefore aware of the Consolidator option, Fuller says, and, if interested, can contact the bank to change to this package.
Absa clients are also required to contact the bank if they want to move to a seniors' package. Information about the rebates for the over-55s is available in branches, and is also communicated to clients during the annual pricing review, Walker says.
He says clients who opt for the seniors' package will not lose any of the benefits they received before changing packages, such as access to relationship managers.
Nedbank relies on clients who turn 55 to contact the bank to discuss its Optimum product offering, Mclachlan says. Clients who use the Optimum account can continue to use any channels they were accustomed to before converting, including personal banking facilities.
Brett Erasmus, FNB's marketing manager for seniors, says the bank contacts its clients around the time they turn 55 years old, to advise them of the Encore Portfolio account. Branches also run marketing campaigns and regular functions are held in the country's main centres to advise existing and potential clients about the account and the benefits available to them. The bank also runs print and radio campaigns about the product.
Erasmus says clients who move to the Encore Portfolio do not lose the benefits that they may have enjoyed on their previous packages.
Interest on investments
Apart from discounted bank charges, all the big banks offer seniors preferential interest rates on their investments.
At Standard Bank, seniors get an extra 0.5 percent interest on a fixed deposit of less than R100 000 invested for 12 months or more.
Seniors at Absa also get an extra 0.5 percent in interest on its fixed deposits and bonus deposits.
Nedbank clients on senior packages qualify for an additional 0.5 percent on fixed deposits of 12 months or longer.
Seniors at FNB get a bonus rate on a fixed deposit of 12 months or longer. This interest rate will vary from time to time, but has historically never been lower than 0.4 percent above the base rate.
Erasmus advises seniors to contact their branches, keep an eye on the media or visit the FNB website for details of the latest offer.
Getting the extras
Depending on the bank, a range of add-on benefits for seniors is offered, from discounted annual fees on credit and petrol cards to specials on short-term insurance and fiduciary services, such as drawing up a will or winding up an estate.
Standard Bank clients on the Consolidator package qualify for discounted rates on their short-term insurance premiums through either Standard Bank Insurance Brokers or Standard Bank Insurance Company. A discount of 25 percent is offered, but this may be increased to 35 percent if you live in a complex with good security.
Furthermore, in the event of a senior client's death, the bank will provide financial assistance of up to R100 000 for the family (up to 12 months, and possibly longer) until the estate is settled. An overdraft limit is also available on the Consolidator option, with cheques certified to R500, credit and debit card facilities, and the option of a student loan for a customer's children or grandchildren, Fuller says.
Absa clients aged 60 and older, who have a net asset value of R300 000 or more can have a will drawn up for free by the bank. To have a simple will drawn up by an attorney can cost about R3 000 - or more if there is complex estate planning is involved.
Apart from cost-effective pricing and preferential interest rates, Erasmus says FNB offers numerous other discounts to its seniors.
FNB's GoldenSure short-term insurance policy is exclusive to clients aged 55 and older. Apart from the usual insurance cover, the policy offers various additional benefits such as free car hire after theft, hijacking or an accident.
In addition to the 33 percent discount on premiums to GoldenSure clients, people who live in a retirement village qualify for an additional discount which will vary from person to person and depend on the risk posed for the insurance company to provide cover. The security within a particular retirement complex is also a factor that will influence this discount, Erasmus says.
So, overall, it is worth contacting your bank to find out what your bank can do for you, because a few less rands to pay here and there can quickly add up to a sizeable saving for you.
This article was first published in Personal Finance magazine, 4th Quarter 2005. See what's in our latest issue