Moneywise Children's Savings Awards 2013

Setting up a savings plan for your child might seem like a flight of fancy when you're paying a second mortgage in childcare, spending a fortune on clothes they'll have outgrown in six months and buying enough food to feed a small army.

But if there's one thing that you can say about kids it's that they don't get any cheaper, as pestering for sweets and magazines grows to requests for cars, help through university and house deposits.

The good news though is that by putting away a little bit each month - or even better, encouraging your offspring to save some of their own pocket money - it's possible to build your child a nice little nest egg.

Whether you're looking for a home for birthday and Christmas money or can afford to pay a more sizeable amount into an investment scheme, the Moneywise Children's Savings Awards are here to help you find the right plan.



Winner: Virgin Young Saver (formerly Little Rock Access Account Issue 2)
Current rate: 3% gross
Age range: Up to 16 alongside an adult
Interest paid: Annually
Minimum deposit: £1
Maximum investment: £10,000
Contact: 0845 600 4466

Highly commended: Chelsea BS Ready Steady Save

The simplest option for parents and kids alike is an instant-access children's savings account, which is great for teaching children about saving and interest. An excellent starting point is the winner in this category, Virgin Young Saver (formerly Little Rock Access Account Issue 2). It has paid a highly competitive 3% since its launch in 2010.

Gavin Haynes, managing director of Whitechurch Securities, says: "Some of the returns on children's savings accounts are miserly. However, Virgin deserves recognition for offering an attractive level of interest with instant access and a minimum deposit of just £1." The account can be run from one of Virgin's 75 Money Stores (branches) or by post.

Another good choice is our runner-up: Chelsea Building Society's Ready Steady Save, which has consistently paid 2% to young savers since 2009. To qualify for our awards all accounts had to be available nationwide, and while our winners are undoubtedly great choices, it's also worth checking out local building societies that can offer cracking rates to children living nearby. Bath Building Society's Future Builder, for example, pays 5% on balances up to £500 to children living in the South West.



Winner: Santander 11-15 Account
Current rate: 2.96% gross
Age range: From 11 to 15
Other features: Visa debit card, online and mobile banking, no overdraft
Contact: local branch

Highly commended: Yorkshire Building Society Freedom Account

As children get older it's likely they'll want more from their account - a cash card, for example, and the ability to manage it online. The top deal in this category is Santander's 11-15 Account.

Gavin Haynes says: "This is an excellent account to provide young people with a good starting point in managing their own funds. The interest rate of 2.96% gross on balances up to £500 is attractive, and access to online banking and a debit card is going to be appealing to teenagers."

The only condition is that account holders have to make at least one deposit a month. This makes a fantastic first current account, but because interest drops offat £500, children with bigger balances should have a separate savings account.

The interest paid on our runner-up account, Yorkshire Building Society's Freedom Account, is not as competitive at 1.74%, but worried parents may prefer the fact that they can restrict how much their children withdraw each month.



Winner: Aviva Stakeholder Pension
Number of funds in pension: 40 available
Charging structure: 1% a year but 0.9% online
Contact: 0800 0927 869

Highly commended: Aegon

The ultimate in long-term saving for your kids is a stakeholder pension. For parents - or grandparents - who have shorter-term needs such as school fees and university costs covered, a pension is a very shrewd investment for a child. Not only do you benefit from tax relief to the tune of 20%, but there's much more time for the money to grow as the recipient won't be able to access the money until they're 55.

According to Scottish Widows, if somebody invested £3,600 (the maximum in one year) in a stakeholder growing at 6% a year on behalf of a child when it was born, it would have £82,900 at retirement.

Even better, thanks to tax relief this rather grand gesture would only cost £2,880. If a very wealthy relative was prepared to do this every year until the child turned 18, the lucky recipient would be a millionaire by the time they retired.

Our pick of the crop is the Aviva Stakeholder Pension. It can be opened for children with a monthly deposit of £20 and run with no more than a 1% annual management charge. It also has a good selection of funds.

Nick McBreen, IFA at Worldwide Financial Planning, praised its investment choice - of 27 internal and 13 external funds - and free fund-switching facility. The runner-up in the category was Aegon.



Winner: JPMorgan
Choice of funds: 850+ investment trusts and funds from a variety of managers
Minimum investment: £50 a month or £100 lump sum
Annual fees: None
Contact: 0800 731 1111

Highly commended: Alliance Trust

Cash accounts are a great way of introducing kids to saving, but miserly interest rates mean they aren't so good if you want to help them out with bigger expenses. For real growth you need to consider equity-based options. This does carry some risk but if you start saving when your children are young, you should have plenty of time to ride out short-term volatility.

Investment trusts in particular are a great way of investing for children because they tend to have lower charges than unit trusts. According to the Association of Investment Companies, paying £30 a month into the average investment trust would typically earn a child £13,690.43 over 18 years. By comparison, the same sum invested in our winning cash account would earn the child just £8,578.21.

Many investment trust companies now run junior ISA schemes, which allow parents to invest on their children's behalf across a range of trusts - in some cases offering access to unit trusts, too. These offer an affordable - and tax-free - way of investing for children, accepting either regular monthly payments or ad hoc lump sums.

The winner in this category is the JPMorgan Junior ISA, which offers access to more than 850 investment trusts and funds from a variety of managers. "I liked this proposition because of the choice of funds available, cost, accessibility and ease of use. You can invest from £50 a month or a £100 lump sum and pay no annual or account fees," says Haynes.

Tim Cockerill, head of collectives research at Rowan Dartington, praised JPMorgan's expertise. "JPMorgan is a long-established investment trust manager with a worldwide presence and considerable resources."

The Alliance Trust Junior ISA was highly commended. It offers access to more than 1,400 investment trusts and funds from more than 40 managers. Anna Sofat, managing director of women's IFA, Addidi, says: "It's a good account for real fund choice but it's more expensive and transactions will have an impact on smaller sums, so it's better suited to bigger investors."


Winner: Aberdeen Investment Plan for Children
Number of investment trusts available through plan: 16
Minimum monthly payment: £30
Minimum lump sum: £150
Initial fee: none
Contact: 0500 000 040

Highly commended: JPMorgan

It is hard to argue against the tax benefits of a junior ISA, but for children whose parents want more control over the money (junior ISAs become the property of the child at age 18), then a children's investment scheme that invests across a range of trusts may be a sensible option.

For the second year in a row, the award goes to Aberdeen Asset Management's Plan for Children. "This savings plan provides a wide selection of trusts from the Aberdeen stable, ranging from core low-cost trackers to Asian trusts where Aberdeen has an exceptional track record," says Haynes. This is also an accessible plan with minimum monthly savings of £30 and £150 for lump sums.

JPMorgan was the runner-up in this category. Cockerill says: "Choice across a quality range of trusts is what sets JPMorgan's savings plan apart. Minimum investment amounts are not the lowest available but charges are very competitive."


For the children's and youth savings categories we analysed five years of historic interest rate data from Moneyfacts. The results were aggregated to find the most consistent, high-paying accounts. Accounts needed to be available to children across the UK and offer instant access.

The winner in the pension category was the winner of the best stakeholder pension from the Moneywise Pension Awards 2012.

The winners in the best "Junior ISA Investment Scheme" and "Best Children's Investment Scheme" categories were selected by a panel of independent judges. We asked them to take into account investment quality and choice, charges and accessibility.

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