26th October 2015
Many child savings accounts have endured harsh rate cuts over the course of 2015, with some deals now paying interest as little as 0.1%.
Research by Moneyfacts.co.uk revealed that the average children’s savings account now pays 1.56% annually, down from the 1.61% a year ago.
While this may seem like only a small drop across the market, this average masks the fact that some individual deals have had severe rate cuts.
So far this year rate cuts of up to 0.74% have been applied to rates on child savings accounts, with providers such as Bank of Scotland, Lloyds Bank and Halifax all dropping their rates.
Worse still, Moneyfacts highlighted that TSB plans to reduce its rate of 3% on its Young Saver account to just 1% AER in November – marking a significant cut.
|Average children’s savings rate||1.61%||1.56%|
|Highest children’s savings rate||3.00%||3.00%|
|Lowest children’s savings rate||0.25%||0.10%|
Rachel Springall, finance expert at Moneyfacts said: “It’s clear to see that parents or grandparents who have opened a savings account for their child or grandchild must keep a close eye on the interest rates paid.
“Changes to rates in this sector have been rare in the past, so it’s disappointing to see that some of the main bank brands that dominate this market are now choosing to reduce the rates they pay. Other providers could also follow suit; most rates in this sector are variable, so they could change at any time.
“Those unhappy with their current deal would be wise to jump ship and open a more attractive account elsewhere. In particular, parents shouldn’t forget the perks of opening a Junior ISA, as these are currently paying the best rates on the market for children and can mature into an adult ISA when the child turns 18.”
November will mark the four-year anniversary of the launch of Junior ISAs, so now is as good a time as any to review where money is being put away for a child’s future and move any stagnant savings accounts, including old Child Trust Funds.
To be eligible to apply for a children’s savings account on behalf of a child, customers may need to hold a current account with the same provider. Consumers must therefore weigh this restriction up carefully, especially if the bank charges a fee or has strict operating criteria on its current account.