Young savers are getting a raw deal from banks and building societies, with the average rate for a children’s easy access savings account at just 1.01%, according to new research by Which? Money.
Research show’s that half of easy access children’s savings accounts pay 1% AER or less, with First Trust Bank’s Junior Saver account offering a return of just 0.05% – that’s 50p for every £1,000 saved and a tenth of the Bank of England base rate.
Accounts affiliated to football clubs pay some of the most miserly rates to young savers, with those linked to likes of Manchester United and Chelsea offering just 0.25%, while Derby County’s Junior Rams account pays 0.1%. That’s a thirtieth of the return available with Northern Rock’s Little Rock account, which pays 3% AER.
Returns aren’t much better for savings in Child Trust Funds (CTFs), the obvious long-term savings option for children born between 1 September 2002 and 2 January 2011, with rates as low as 1.1% for a cash CTF from Nationwide.
What’s more, with CTFs now closed to new savers, Which? predicts that rates will decline as savings providers concentrate their efforts on the new market for Junior Isas, which will replace CTFs in November 2011.
And, with current rules preventing CTF savers from transferring their funds to a Junior Isa, Which? warns that millions of young savers could be trapped on poor rates.
Which? executive director Richard Lloyd says:
“It’s incredibly important that young people get into the habit of saving, but banks and building societies are doing little to encourage them by offering such paltry rates.
“The situation is set to get worse, as unless the Government allows transfers from Child Trust Funds to Junior Isas, a whole generation of young savers could be stranded on uncompetitive rates.”
Source : Which?
