What's the best savings account for money left to my grandchildren?

17 December 2015


What’s the best savings account for money left to my grandchildren?My mother died four years ago and left £3,500 each to be invested for her four great grandchildren in trust until they were 18. As their grandparents, my brother and I set up a fund for each child with ourselves as trustees.The money was initially invested in a three-year term savings account that expired last October.Each account had grown to £3,866. I moved the money into an instant- access account with a lower interest rate in the hope that I would find somewhere else to invest it with better returns. I had been told that interest rates should rise during 2015.The problem is I am now finding it difficult to find another account that accepts a lump sum only and that doesn’t involve regular savings input as well.The children range in age from six to 12 years old.Can you please advise the best way forward for me?
CP/Vale of Glamorgan


Just as is the case on adult savings accounts, children’s savings accounts come in all sorts of shapes and sizes, although there is less choice overall, especially regarding fixed-rate bonds.

The other aspect that may reduce the available range further, is the type of trust that the funds are held under. If you set up a bare trust for each child, (which may also be referred to as a nominated account, or on behalf of), this should have little impact on the restriction, as most savings accounts can be simply set up as a bare trust.

If it is a different type of trust, I suggest you seek specialist advice from a financial adviser.

Unfortunately, it is uncertain when the Bank of England will raise interest rates – it has been talked about a great deal but has remained at 0.5% for more than six years.

But the good news is that many children’s accounts pay much better than 0.5% anyway, so the key is to shop around.

At the moment, one of the best easy-access accounts for the balance that each child has is with Nationwide Building Society. Nationwide Smart Limited Access account is offering 3% AER on up to £50,000 but if more than one withdrawal is made a year, the rate will plummet to 0.75%.This needs to be opened in a branch.

The HSBC My Savings Account also offers 3% AER but only on balances of up to £3,000. For larger balances, Halifax Young Saver offers 2.25% AER on balances of up to £20,000. Again, the easiest way to open these accounts is via the branch.

These rates are variable, so it’s important to keep an eye out for any rate changes and to check from time to time whether a better rate becomes available elsewhere.

Anna Bowes is a founder and director at Savings Champion.