Why poor savings rates for children?

Hamstar

My 13 year old daughter has a substantial sum in a Nationwide Smart account earning only 0.75% interest. It appears that she cannot run an internet savings account (minimum age is 16) and all the high street account interest rates (including trustee) are derisory. I then thought that I could open an internet account in my name (earning more like 3%) but nominate the account as “Account for daughter xxx”. All the interest on this (her transferred Nationwide) account would be declared on her tax return, but I wonder if this would create problems when the building society report back to the Inland Revenue - the accrued interest in my name? Is this allowed? Why should children get such a raw deal with their money? I do not want to tie the money up in a bond, regular savings or fixed term. Any ideas for a better instant savings rate?

saving-mad

thanks hamstar for asking this, we have 2 teenagers and they have substantional savings that we have given them over the years, the intrest rates are rubbish, i too want to draw out all their money and put it in my halifax 6% account but do not want to get into tax trouble for doing this,
any ideas anyone

anselld

Coventry Poppysave 3% by post ?
Or Skipton Bond 3.45% to Feb 2010?

PS Halifax let my 15 year old have an Internet based account.

nicko33

other than the Coventry POppy

Holmesdale Building Society Young Saver Account at 2.7%
operate through branch or post
instant access
£10-£25000

anselld

saving-mad wrote: »

thanks hamstar for asking this, we have 2 teenagers and they have substantional savings that we have given them over the years, the intrest rates are rubbish, i too want to draw out all their money and put it in my halifax 6% account but do not want to get into tax trouble for doing this,
any ideas anyone

Not sure why there should be a tax problem so long as you are paying tax on the 6%

jonnyb

I'm about to move £2000 of my 1 year old son's money from his save4it halifax account, where the interest is tax free, but a crap rate.
It's going into an alliance and leicester account paying 6%, in my name, so I will pay 20% tax on the interest, but I don't care as it will be so much more than the halifax tax free interest anyway.

saving-mad

anselld wrote: »

Not sure why there should be a tax problem so long as you are paying tax on the 6%

it was more really the face that can i give money to the children and then effectively take it back?
i am a non tax payer myself so would not pay tax on savings in my name

anselld

saving-mad wrote: »

it was more really the face that can i give money to the children and then effectively take it back?
i am a non tax payer myself so would not pay tax on savings in my name

I think that is OK - you can give money each way without any tax implications. The only issue might be on death with IHT but only if a large amount involved and hopefully not an issue anyway!!

realaledrinker

saving-mad wrote: »

thanks hamstar for asking this, we have 2 teenagers and they have substantional savings that we have given them over the years, the intrest rates are rubbish, i too want to draw out all their money and put it in my halifax 6% account but do not want to get into tax trouble for doing this,
any ideas anyone

Generally, you are more likely to get into trouble with the taxman for not declaring their income as your own in any event - if a child earns >£100 p.a. from interest on money given to them by their parents, it is deemed to be income of those parents & taxable at their marginal rates. (although note your point ref. being a non taxpayer)

anselld wrote: »

I think that is OK - you can give money each way without any tax implications.

Completely wrong advice - see above!!

Sobraon

CBS's PoppySave account seems to have a "hidden " condition that applicants "need to be 18", as the person on the counter gleefully and with a degree of schadenfreude informed me earlier this week when I went into open DS1 an account (he is just 16). I was going to post a link but I can't find it on the Coventry's website - hence "hidden" - and I have emailed them for confirmation.

PBA

The problem is that childrens' accounts generally don't pay an introductory bonus, whereas almost all adult savings accounts do. To be profitable then these accounts need to pay less than the base rate, which means rates that look terrible at the moment. Many banks will let children open their fixed rate bonds however, which might be the best option at the moment.