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Woe for young savers as Halifax axes top account

Adam Williams
All children with a Young Saver account will have their balances transferred automatically to Halifax's Kids’ Saver account - Jonathan Ross/Getty Images

Halifax is to close its popular Young Saver account and transfer customers to a lower-paying alternative.

From July, all children with this Halifax account will have their balances transferred automatically to a Kids’ Saver account. They will no longer be able to use the bank card provided with the Young Saver and the interest offered by the new account will be lower.

With the Young Saver account, children could earn 2pc interest on balances up to £20,000 and 0.25pc above that amount. With the new Kids’ Saver the 2pc rate is restricted to the first £5,000 deposited, with balances above that level earning earn 0.2pc.

A customer with £20,000 in their child’s Young Saver account would earn £400 a year in interest but the same balance in a Kids’ Saver would earn just £130.

The Young Saver was Halifax’s flagship children’s account between 2011 and 2018 but was closed to new customers earlier this year.

Telegraph Money reader Geoff Melbourne opened an account for his seven-year-old grandson when he was born. He currently has £7,000 saved in the account, so his annual return will drop from £140 to £104 from July. 

“We took it out when my grandson was born and the money has accumulated since then. He’s going to be getting 0.2pc on any new cash I put in there where he would have been getting 2pc.

“I am definitely going to be closing this Kids’ Saver. The only problem is finding an alternative.”

Halifax said the Kids’ Saver offered increased functionality, as the account can be operated online. Parents will also be able to see and manage their children’s account using their own internet banking and mobile apps.

Sort codes and account numbers will remain the same after the switch.

In a separate change, customers with the Kids’ Regular Saver – which pays 4pc or 4.5pc depending on when the account was opened – will see their accounts become a Kids’ Monthly Saver. This offers a 4.5pc fixed rate of interest to all customers.

Where are the best savings accounts for children?

Charlotte Nelson, of financial analysts Moneyfacts, said there were more competitive accounts on the market for parents to consider.

Nationwide offers 2.5pc interest on balances up to £50,000 with its Smart Limited Access account, but restricts users to one withdrawal per year.

Holmesdale Building Society pays 2.25pc to savers on balances up to £25,000.

For smaller balances, the HSBC MySavings pays 2.75pc on deposits up to £3,000 and 0.5pc on cash above that level.

“It is always wise to shop around to see which account best suits your situation. Parents should try not be enticed by any upfront gifts as these accounts often have lower returns,” Miss Nelson said.

“Some children’s accounts allow you the flexibility to dip in and out of the savings, but often the best accounts restrict access.

“Restrictions can vary between the account being held in trust by an adult, to the parent/grandparent having to authorise the withdrawals made and sometimes proving the withdrawals being made are for the benefit of the child.”

Despite the changes to its Young Saver, Miss Nelson said Halifax offered the best regular saver product for children, paying 4.5pc, although this only allows deposits of £100 per month.

adam.williams@telegraph.co.uk