It is unusual to see a mass of rate cuts on children's savings accounts, but our latest research reveals that, regrettably, this is exactly what's happening. It means that rate cuts are no longer confined to adult savings accounts, and with more than 100 cuts having been made to child savings accounts in the year so far, some are paying paltry rates of interest – in some cases as little as 0.10% per year.
The figures show that fixed rates and junior ISAs (JISAs) have seen some of the biggest cuts, with some fixed rate regular child savings rates having faced cuts of up to 2.00%. Many variable rate child savings accounts have also been reduced over the last few weeks due to the base rate cut, with some cut by as much as 0.55% - which, alarmingly, means they've gone beyond the 0.25% base rate reduction.
Overall, the average children's saver rate now stands at just 1.39%, a sharp reduction from the rate of 1.61% recorded a year ago. Rachel Springall, finance expert at Moneyfacts, said that it was "hugely disappointing" to see children's savings accounts facing the same treatment as adult accounts, and warns that more bad news is yet to come.
Halifax is set to slash its existing customer JISA to 3%, down from 4% currently, Rachel explains, and unfortunately, "we are unlikely to have seen the last of these JISA cuts. This just shows how important it is for parents to review the rate regularly to make sure the account remains competitive, [and] if a good deal turns bad, it's wise to consider switching to another account".
Happily, there's a slight glimmer of hope in that some of the best buy deals are still available, with the best JISA rate having remained at 3.25% for the last few years. This rate can be achieved through Coventry Building Society, and it accepts transfers in if you're stuck in an account paying lower rates of interest (but just keep in mind that this is a variable rate so it could change over time).
Similarly, the top-paying variable children's savings rate now stands at 2.96%, only a slight drop from the top rate of 2.97% recorded this time a year ago, but it's worth bearing in mind that some other types of savings account can still offer a better deal.
"Some fixed regular savers still offer considerably higher rates than alternative child savers," said Rachel. "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 with £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."
So, if you're not getting a good deal for your child's savings, now could be a great time to consider switching. Variable rates may be commonplace in this sector but if you can find a fixed rate deal it could be well worth it, as it would help you avoid being hit by rate cuts for the foreseeable future. Check out our child saver and JISA best buys to get started and see if you can find a better deal.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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