Child Savings Accounts Face Gruelling Interest Rate Cuts
Personal_Finance / Savings Accounts Oct 11, 2016 - 05:05 PM GMTBy: MoneyFacts
It is unusual to see a mass of rate cuts on children’s savings accounts, but the latest research by Moneyfacts.co.uk reveals this is exactly what’s happening. More than 100 rate cuts have been made over the course of 2016 to child savings accounts, so much so that some deals are now paying as little as 0.10% per year.
Disappointingly, some of the fixed rate regular child savers have faced cuts of up to 2.00% this year, while some JISAs have had cuts of up to 2.25%. Furthermore, variable rate child savers have been reduced over the last few weeks due to the base rate cut, with some cut by as much as 0.55%.
The best Junior ISA thankfully retains a Best Buy rate of 3.25%, which is a much more competitive return than the best easy access child saver, which pays 2.96%.
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:
“It's hugely disappointing to see children's savings accounts facing the same treatment as adult accounts, but this just shows how important it is for parents to review the rate regularly to make sure the account remains competitive. More bad news is yet to come, with Halifax slashing its 4% existing customer JISA to 3% for those who hold its adult ISA, and we are unlikely to have seen the last of these JISA cuts.
"If a good deal turns bad then it’s wise to consider switching to another account. For example, for Junior ISAs, Coventry Building Society currently offers a 'best buy' deal paying 3.25% and accepts transfers in - just keep in mind that this is a variable rate so it could change over time.
“Some fixed regular savers still offer considerably higher rates than alternative child savers. For example, Halifax and Saffron Building Society have a 12-month fixed regular saver paying 4.00%, which is the highest rate around. Maxing out this account will earn £48.97 in interest over one year on a £1,200 investment compared to £36.05 in interest from the best child’s easy access account paying 2.96% from HSBC.
“Next month will mark the five-year anniversary of the launch of Junior ISAs, and while these have brought some decent deals into the market over the years, now would be a good time to review any stagnant deal and consider moving the cash to something more competitive.
“Unfortunately as the majority of child savers pay variable rates, they are in danger of rate changes at any moment, so it’s worthwhile to be diligent in checking the savings pot on a regular basis and not put up with any paltry interest.”
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