Yorkshire Building Society has released a new children’s savings account paying an attractive rate of 5pc for one year, but there’s a catch. The account is only available to members of the society.
Any child aged 11 to 15 who has been a member of Yorkshire Building Society for at least two years can open an account. Alternatively, an adult customer who has been with the society for two years can open the savings account on behalf of their child.
The account allows monthly deposits of up to £150, to a total of £1,800 over 12 months, and children will be able to access their money a maximum of four times during the year.
Parents or children can open the account in one of Yorkshire’s 231 branches, as well as in branches of Norwich & Peterborough Building Society, Chelsea Building Society and Barnsley Building Society.
Verdict:
Yorkshire Building Society is offering a very attractive rate on its children’s savings account, the second best on the market following Halifax’s 6pc Child Saver rate (see below).
The fact that the account is restricted to existing members is a major drawback, however. Despite the society having 3.4 million customers, the majority of British young savers will miss out on the deal because they are not a member of the society.
Halifax’s child saver on the other hand is available to anyone.
Not only is the rate high on Yorkshire’s account, but it allows monthly deposits of up to £150, whereas Halifax limits the amount to £100 a month.
This means savers with Yorkshire could earn interest of £38 a year (after tax) if putting the maximum allowance in the account over 12 months. Halifax savers would earn £30.
While HM Revenue & Customs automatically taxes every savings account at 20pc, regardless of whether tax is due, it is possible for children under 18 to earn interest before tax. A parent must fill in a special form, called an R85, available from bank and building society branches, or online at hmrc.gov.uk/forms/r85.pdf
To prevent a parent from using their children’s account to earn interest on their money, HMRC limits the amount of interest a child can receive to up to £100 a year. [More: £15m tax raid on children’s savings]
Best children’s savings accounts and rates
• Halifax Kids Regular Saver, paying 6pc (fixed for one year). Requires a minimum opening balance of £10, with access available in branch only. Children must be no older than 15
• The West Brom Child Fixed Rate Regular Saver 3, paying 3.6pc (fixed for 12 months). Requires a minimum opening balance of £10, with access in branch. The account is open to children up to the age of 15
• Dudley Building Society Junior Easy Saver, paying 3.5pc (fixed). Requires a £10 opening balance with access in branch or by post. Available for children up to the age of 15 only
• Halifax Young Saver, paying 3pc (variable). Access in branch, requires a £1 minimum balance. Children must be no older than 15
• Mansfield Building Society, paying 3pc (fixed, but savers can make two withdrawals a year). Requires a £1 opening balance with access in branch or by post. Available for children up to the age of 18.
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