Big banks deprive children’s savings accounts of full interest rate hike
Big banks are failing to pass on the full interest rate hike to children’s savings accounts, an analysis has found.
Yields on children’s savings accounts have risen an average of just 0.43 percentage points since December, according to Savings Champion, an analyst.
This is despite a 1.65 percentage point increase in the bank rate since December, which rose from 0.1 to 1.75 percent. The Bank of England is expected to raise it again next week.
Yet ordinary savings accounts saw a larger rate increase, ranging from an average of 0.64 percentage points on easy-access savings to 1.48 percentage points on fixed-rate bonds. .
Some banks, including Lloyds and Santander, have not raised rates for new customers wanting an easy-to-access children’s savings account with balances below £1,000, data from analyst Moneyfacts shows.
Barclays raised child-friendly savings rates by just 0.2 percentage points, while NatWest and Royal Bank of Scotland raised yields by 0.4 percentage points.
Laura Suter, of investment broker AJ Bell, many new banks were offering higher interest rates to keep savers away from the big banks, but many still didn’t offer children’s savings accounts.
She said: “Children are being deprived of the rate war in the savings market, much to the frustration of their parents.
“This is driven by two main factors: challenger banks don’t offer children’s accounts, and parents are dumb enough to upgrade to better rates.”
Ms Suter said parents should opt for a better rate or transfer the money to a savings account in their name.
She added: “With the best online account for kids under seven only paying 1pc interest at the moment, it’s likely some parents might get a better return elsewhere.”
Sarah Coles, of investment broker Hargreaves Lansdown, said children’s accounts “play a very important role in helping children master money and giving them a stake in their own future”.
She said: “If they don’t offer a decent interest rate, their first savings experience will be a disappointment – hardly a sensible way to build up the next generation of savers. So it’s frustrating that these accounts aren’t keeping pace with rate increases. »
She said parents who want better returns could consider a child’s account with a linked checking account, with banks offering better deals in hopes of attracting customers they can keep for life. HSBC offers 3.25pc on sums of up to £3,000 in the bank’s My Savings account, for example.
High Street banks have told Telegraph Money their rates paid on children’s savings accounts are ‘competitive’. A spokesperson for Lloyds, Halifax and Bank of Scotland said rates had been raised on many of their children’s savings accounts, including for larger balances on easy access accounts.
Santander said its 123 mini checking account pays one of the highest rates in the market and said it held the rate throughout the period when the bank rate fell and remained low. He said he raised savings rates on other children’s savings accounts.
Barclays said its children’s savings account offers a competitive rate of 1.71%, while a spokesperson for NatWest and the Royal Bank of Scotland said the rate had recently been increased on the First account Save.