Young savers are getting a raw deal from banks and building societies, with the average rate for a children’s easy access savings account standing at just 1.01%, according to new research by Which? Money.
The consumer champion found 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.
Check out our Best Rate tables for the highest-paying children’s accounts.
Football savings accounts and Child Trust Funds
Savings accounts affiliated to football clubs pay some of the most miserly rates to young savers, with those linked to the 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.
Get into the savings habit
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.’
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.