Low interest rates 'deter young savers', study suggests
Wednesday, 27 July 2011 09:41
Low interest rates on children's savings accounts are deterring many parents from investing in their future, a new study suggests.
According to a survey by consumer group Which?, the average instant access account for children provides a 1.1% return on money invested, while some even offer rates as low as 0.05%.
Those offering some of the lowest interest rates include child savings accounts affiliated with major football clubs.
Which? also said it expects interest rates on child trust fund accounts to fall sharply when the new junior ISA is introduced later this year.
'It's really important that children are encouraged to save, but it's a real disincentive when there are such poor rates on offer,' commented James Daley, Editor of Which? Money.
'We think the situation may get worse unless the Government allows transfers from child trust funds [CTFs] to junior ISAs as we foresee that rates for CTFs will decline as providers concentrate their efforts on the new market for junior ISAs.'
The findings have prompted calls for banks and building societies to review their rates and do more to incentivise saving.
However, the Financial Secretary to the Treasury, Mark Hoban MP, said the introduction of junior ISAs shows the Government is dedicated to improving the UK's savings culture.
'Junior ISAs will be a great example of a simple, clear and tax-free account that allows families to save and invest for their children's future,' he said.