By Sylvia Morris 21st December 2010
Miserly banks and building societies are paying children as little as 0.01 per cent interest, which adds up to a princely 1p interest a year on every £100 of savings.
The meanest include some of the biggest names on the High Street, including Barclays, Britannia, Santander and C&G.
Parents should avoid these High Street Scrooges when looking for a home for their children’s Christmas money.
Getting more for their money: Gennaro and Helen Romano were appalled at the low interest rate their children Francesco and Luca were getting at Alliance and Leicester so they switched to Northern Rock where they earn a healthy 3 per cent
C&G, for instance, pays just 0.05 per cent to children under 16 on its Young Investor account — or a barely credible 5p interest a year on each £100.
The bank is the savings and mortgages arm of the giant Lloyds banking group, which was kept afloat by a massive injection of taxpayers’ cash.
The interest it pays is 60 times less than the top 3 per cent paid by Northern Rock.
This rip-off come at a time when the Government wants to encourage us to save.
Mark Hoban, financial secretary to the Treasury, said in the autumn: ‘The Government is committed to encouraging saving for children within the constraints of public finances.’
And in a particularly vicious twist, some of the biggest names on the High Street pay less on specialist children’s accounts than they do on adult ones.
C&G’s Cheltenham Gold branch-based account for the over-16s, which works in a similar way to its Young Investor account, pays 1.9 per cent on savings up to £1,000 and higher rates above this.
This rate includes a bonus, but even without the bonus it still pays 0.4 per cent — eight times more than it pays to children.
And banks are not above playing other dirty tricks on children. Alliance & Leicester FirstSaver was once a top payer, but now it is called Santander Instant Access and pays 0.1 per cent.
Santander Flexible Saver for Kids is also a disgrace, paying 0.4 per cent — less than half what adults are paid on its branch-based Instant Access account.
But young children are excluded from this account, because the minimum age is 11.
Shockingly, building societies are also letting children down despite their claims to be committed to encouraging saving and supporting local communities.
West Bromwich’s Acorn account pays 0.05 per cent. Other culprits are Dunfermline, part of Nationwide, Hinckley & Rugby and Newcastle — which all pay just 0.1 per cent.
The worst of the bunch is Newcastle’s Young Saver, now closed to new savers, which pays just 0.01 per cent, or 1p a year interest on £100.
Although there are no rules on the minimum age for a savings account, individual banks and building societies do set limits. And many keep their better rates for those aged 16 or over.
Children can also be ruled out of top-paying internet accounts because you need a bank account to run them — although an adult can often open one in their name in trust for their child.
So where can you go for a decent deal? Northern Rock’s Little Rock pays a much healthier 3 per cent.
Other decent children’s accounts all come from building societies: Chelsea (2 per cent); Skipton (1.8 per cent); Norwich & Peterborough (1.75 per cent); and Yorkshire Building Society (1.75 per cent).
And for parents and relatives wanting to put money away, Northern Rock also offers a fixed-rate version at 3.75 per cent fixed until September 2013.
Yorkshire and Clydesdale banks both pay 4.25 per cent fixed for five years.
This is much better than the government-sponsored National Savings & Investments. Its Children’s Bonus Bond pays just 2.5 per cent tax-free for five years.
If you want to put money away for your child each month, Halifax Children’s Regular Saver Account offers a good deal, paying 6 per cent. Paying in £100 a month builds up to £1,239 in total over a year.
When you open a savings account for your child — either an easy access one to encourage them to save, or a fixed-rate, longer-term deal — make sure you or they fill in form R85, available from banks and building societies.
This will allow interest to be paid before tax is deducted.
Children have their own personal tax allowance — currently £6,475 — but they can earn only £100 interest from money given by each parent before they face tax.
Once the interest breaches this limit, tax is paid at the parent’s highest rate of tax. At 3 per cent, the top rate available on easy-access children’s accounts, each parent can put in £3,300 without going over the limit. At 2 per cent, it’s £5,000.
Once children reach the age of 16, they are eligible to take out a tax-free cash Isa which should give them a better deal — and easy access to their money.
Avoid these ten misers
Newcastle Young Saver (0.01 per cent); C & G Young Investor (0.05 per cent); West Bromwich Acorn (0.05 per cent); Dunfermline M and S accounts (0.1 per cent); Hinckley & Rugby Flying Start (0.1 per cent); Newcastle Nova 18 (0.1 per cent); Barclays Children’s Savings (0.25 per cent); Britannia FirstSaver (0.25 per cent); Kent Reliance Wishmakers (0.25 per cent); Santander Flexible Saver for Kids (0.4 per cent).
For more on children’s savings, go to www.thisismoney.co.uk/children
'We get 3 per cent at Northern Rock'
Francesco, seven, and Luca, six, both have a Northern Rock Little Rock savings account, paying 3 per cent, into which they put birthday money and intend to add any Christmas money.
Parents Helen and Gennaro Romano (pictured with the boys), from Norwich, let them spend some of the money but encourage them to put the rest into their savings accounts.
Helen switched the account to Northern Rock this year.
‘They were in the Alliance & Leicester FirstSaver, but the rate dropped dramatically so we moved it to a better deal in the High Street.’
The Alliance & Leicester account pays a mean 0.1 per cent.
No comments:
Post a Comment