Banks take axe to top-paying children’s deals
SAVINGS accounts for children are at the centre of a series of cruel raids by banks, building societies and the taxman.
An investigation by Money Mail has revealed how 100,000 young savers face rate cuts that will slash their interest by two-thirds. The most savage has been meted out by TSB, which has hacked payouts on its easy-access Young Saver from 3 pc to 1 pc.
It’s a particularly bitter blow as many of these customers did not choose to be part of TSB, but were shunted across from Statebacked Lloyds TSB when the banks were forced to split in September 2013.
Young customers who stayed with Lloyds are still earning 3 pc on their accounts.
So far this year, 23 children’s accounts have had their rates cut. Last year, only three were chopped. On top of this, we can reveal how thousands of children will be subjected to a mean tax raid that could strip a further 40 pc from their interest.
This is because children who have been given savings by their parents will not be eligible to use a new £1,000 tax-free savings allowance. Instead, they can earn only £100 a year tax-free — above that, they pay income tax on all their interest at their parents’ highest tax rate.
Tom Adams, head of research at savings adviser Savingschampion.co.uk, says: ‘The huge TSB cut will come as a blow. Sav- ers should move their children’s money to a better deal.’
Having a decent rate for children was one of the perks of a TSB current account as the Young Saver is on offer only to current account holders.
But the impending cut makes the TSB version of Young Saver one of the poorest deals on offer. Halifax Junior Isa savers saw their rate tumble from 6 pc to 4 pc earlier this year and Skipton BS has cut its Junior Isa to 2.65 pc from 3.02 pc.
Among the smaller building societies, rates at Furness Cash Junior ISA and Child Trust Fund have fallen from 2.6 pc to 2.1 pc, while Newcastle Building Society’s Junior Isa rate also fell from 2.6 pc to 2.1 pc.
Some 78,000 children will see a rate rise from TSB — but only from a paltry 0.5 pc to 1 pc — on Young Saver accounts opened before August 15, 2011. You can treble the rate with a top-paying easy-access account at 3 pc from other providers, such as Halifax, Nationwide and a couple of smaller building societies.
Halifax Young Saver is open to children under the age of 16.
Nationwide Smart Limited Access is open to children up to age 18. Your child can open his or her own account once they reach the age of seven. But they are limited to making just one withdrawal a year. If they make more the rate drops to 0.75 pc.
Children under 18 who live in the Nottingham BS operating area can open a Robin Hood Young Saver at 3 pc as long as they save at least £1 a month. Newbury BS’s Barry Bear account for children under seven living locally also pays 3 pc. Other good deals where you can at least double the new TSB rate come from Skipton BS and Holmesdale BS, both at 2.25 pc, Saffron BS at 2.05 pc and Virgin Money and Chelsea BS pay 2 pc. Des McDaid, head of savings at TSB, says: ‘When TSB launched, we inherited a number of youth savings accounts paying varying rates of interest.
‘We continually review our accounts to ensure all customers with similar accounts earn comparable rates. As a result, some customers will see an increase while others see a decrease.’