Moneywise Children's Savings Awards 2017
New research paints a damning picture of financial education in the UK. Less than a quarter of parents with children aged 17 or under regularly talk to their children about money or how to manage their finances.
The study by the Money Advice Service also found that 27% of parents think their children have a low level of financial education.
Meanwhile, findings from Halifax show that a third of children aged between eight and 15 worry about money, a figure that rises to more than half (54%) in the Greater London area.
However, on a more positive note, almost a third (63%) of children want to learn about bank accounts and how they work.
There is no better way to teach your children – or grandchildren – about saving than with a bank account they can pay their money into. The experience of visiting a bank to pay money in and seeingit grow on bank statements helps them understand the rewards of putting their cash away, and it encourages them to get the savings bug early.
With that in mind, the Moneywise Children’s Savings Awards highlight the best accounts available, whether it’s high-interest accounts that children can dip in and out of or Junior Isas (Jisa) for those with longer-term savings goals.
Alternatively, if you are a parent or grandparent wanting to give your children or grandchildren a financial head start when they become adults, we’ve also selected the best investment platforms on which to nurture your nest egg. Once the kids are a bit older, these can also provide a great insight into stock markets and the benefits of investing.
Best instant-access account
Winner: Penrith Building Saver, Junior Saver
Highly commended: Darlington Building Society, High Days and Holiday Bonus Saver
Savings Champion judged all the awards in our cash saving categories. Accounts needed to
be available nationwide, require low opening deposits and offer a consistently high interest rate over the past three years.
Taking the award for the best instant-access account this year is Penrith Building Society’s Junior Saver. The account requires an opening balance of just £1, pays a very competitive 2.5% interest and can be run from branch or by post (for those not living in Cumbria).
Commenting on the winner, Tom Adams, head of research at Savings Champion, says: “This account is paying a competitive rate of 2.50%, and while the rate fell from 2.65% in September this year, the previous rate was unchanged since September 2013, so it has been consistently competitive over the past three years. Quite simply, this account is straightforward and easy to access, and it pays one of the best interest rates on the market for children.”
The runner-up in this category is the Darlington Building Society with its Junior High Days and Holidays Bonus Saver – showing that the best deals for children are often from smaller building societies. It pays a rate of 2.25%, but this does include a bonus of 1%, which is withdrawn if more than two withdrawals are made in a year. Mr Adams says: “While the number of withdrawals is restricted, if parents are putting away money on a regular basis for their child’s future, this shouldn’t prove too much of a problem. This account has held pretty strong, with no rate changes at a time when the majority of providers are cutting rates."
Best youth account (age 11 upwards)
Winner: HSBC, My Savings
Highly commended: TSB, Under-19 account
The same judging criteria applied in this category. However, Savings Champion was also looking for features that would appeal to this age group, who are more likely to be earning their own money and making more frequent withdrawals.
Holding on to last year’s crown, the winner in this category is HSBC My Savings.
The account is available for children aged between seven and 17, and it pays an impressive 2.72% on balances up to £3,000. The minimum opening balance is £10. The account can be managed in a branch, online or by mobile phone.
Mr Adams says: “It’s an ideal account for those aged 11 or over, as it not only pays a great interest rate, but also comes with a current account, which includes a Visa debit card. The maximum balance of £3,000 is fairly low, although it should suit the majority of 11-year-olds, and those who have more to invest can simply add an additional savings account.”
The runner-up in this category is TSB Bank’s Under-19 Account. It pays 2.47% on balances up to £2,500. The account is available from age 11 and includes a Visa debit card. It can be run in a branch initially, but once children turn 13 they can take advantage of mobile banking. Internet and telephone banking is restricted to over-16s.
Mr Adams says: “The account is paying a competitive rate and has done so since 2009, so it has remained unchanged at a time when many banks and building societies have been reducing rates. There are lots of ways that young people can access and operate the account, including on the high street and in a branch. Plus offering access to mobile banking is bound to appeal to today’s tech savvy teenagers.”
Best Junior cash Isa
Winner: Coventry Building Society, Junior Isa
Highly commended: Nationwide, Smart Junior Isa
If you or your child is putting cash away for the long term, it’s worth looking at cash Junior Isas. You can save up to £4,080 a year without paying tax on the interest, but the catch is that the money cannot be accessed until the child turns 18.
For the fourth year running, Coventry Building Society takes the award in this category. Its Jisa pays a cracking 3.25%.
Mr Hughes says: “This account was launched on 5 April 2012. Since then it has paid the same competitive rate of 3.25%, a rate many adult savers would jump at. The account has been one of the highest paying for its entire lifetime, and it even remained unchanged following the cut in the base rate. Consistent and competitive, it’s simply one of the best Junior Isas around.”
Nationwide’s Smart Junior Isa takes the runner-up position for the third year running with a 3% interest rate that will still turn most parents’ eyes green.
Mr Adams says: “It’s a simple, straightforward and competitive account. Prior to September, it was a joint market leader paying 3.25%, and while the rate has been cut as a result of the base rate reduction, the new rate remains one of the best on the market."
Best Investment Isa
Winner: Fidelity, Junior Isa
Highly commended: Charles Stanley, Junior Isa
For children who have between five and 18 years for their savings to grow, a junior Isa that offers access to equity-based investments may make sense.
Although fund performance cannot be guaranteed, it is likely that an Isa invested in a portfolio of well-chosen funds will grow faster than a cash equivalent.
The judges in this category were looking for junior Isa platforms that offered access to an attractive selection of investment funds, good value for money, and a website that is easy to use and offers the right level of support for novice investors.
Taking the award again this year is the Fidelity Junior Isa. Gavin Haynes, managing director at Whitechurch Securities, says: “The Fidelity junior Isa provides a very simple process for investing in a junior Isa. It provides its own managed solutions based on your risk profile (their Pathfinder option) as well as a self-select option from a list of 50 favoured funds or a wider list from 100 investment houses.”
Justin Modray, an independent financial adviser and founder of Comparefundplatforms.com, says the package is “the best all-round combination of reasonable platform fees, useful fund information and helpful online tools”.
Coming in a very close second place is the Charles Stanley Junior Isa. It’s the favourite of Patrick Connolly, chartered financial planner at independent financial adviser Chase De Vere, who says: “This product has an annual platform charge of 0.25% a year, which is considerably cheaper than some of the main product providers, and these charges are very clearly explained. There is a wide range of investment fund options and useful information on these funds.”
Best children’s investment trust savings scheme
Winner: Baillie Gifford, Children's Savings plan
Highly commended: JPMorgan, Investment Account
These schemes offer access to investment trusts, which can provide a great home for children’s savings. Like investment funds, they pool together investors’ money to buy shares in a range of companies and manage those investments on your behalf.
However, unlike funds, they are listed on the stock market as companies in their own right. They are also subject to different rules – for example, they can borrow to invest.
The big appeal, though, for many investors is that they have track records of performing better than rival open ended funds over long periods, which is important when you may only be putting away a small amount each month.
Taking the award for the second year is the Baillie Gifford Children’s Savings Plan.
Mr Connolly says: “This savings plan provides access to a selection of well-managed Baillie Gifford investment trusts. These include diversified global equity investment trusts, such as Scottish Mortgage and Monks, that are ideal for a core stock market holding.”
He adds: ”The scheme is very accessible too. The minimum investment into each trust is a£100 lump sum or £25 a month. This is a good all-round proposition, and Baillie Gifford is a well-reputed investment management company.”
The runner-up is the JPMorgan Investment Account. Mr Connolly says: “JPMorgan is one of the premier investment companies, and it places a real focus on its investment trust offerings. The information on its website is clear and concise, and its savings plan gives access to a wide range of good-quality investment options. Charges are very competitive.”
Best pension for a child
Winner: Royal London, Personal Pension
Highly commended: Aviva, Personal Pension
If you have the money to spare, and have expenses such as university fees and house deposits adequately covered, setting up a pension for a child can be a fantastic investment.
There is tax relief on contributions, and there is plenty of time for the money to grow, as a child won’t be able to access their money until they are 55 (based on current legislation at least).
In this category, our judges were looking for quality of investments, flexibility and value for money in terms of charges. Mr Connolly says: “What really separates Royal London from the rest of the pack is its exceptional standards of service, which should make life much easier for parents and grandparents investing on behalf of children. Its pension has competitive charges and a good range of investment fund options.”
The runner-up in this category was the Aviva personal pension. Nick McBreen, an independent financial adviser at Worldwide Financial Planning, says: “Aviva has to be one of the best-kept secrets in terms of fund management. Apart from the obvious brand awareness and financial strength, it offers plenty of choice.”
In the cash categories, Savings Champion used historic interest rate data over the past three years to determine the winners.
For the Isa category, it included all Isas that had been launched within six months of November 2011 when the product was first introduced. All accounts needed to be available nationwide, and have minimum restrictions and low opening balances. With the exception of Isas, they had to offer instant access.
We asked Holly Mackay, founder of Boring Money, to put together a shortlist of the best Junior Isa providers.
Contenders were assessed by a panel of judges with input from the senior editorial team at Moneywise. The shortlist for the best investment trust savings scheme was provided by the Association of Investment Companies and, again, judged by our independent financial adviser panel and the Moneywise team.
For the best pension for children, we took the winner from the best personal pension category in the Moneywise Pension Awards 2016.
Tom Adams, head of research at Savings Champion, selected the winners in the cash categories. For the investment categories, we used a panel of judges, including Justin Modray, founder of Comparefundplatforms.com, Gavin Haynes, managing director at Whitechurch Securities, and Patrick Connolly, chartered fi nancial planner at independent financial adviser Chase De Vere.
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.