Savings Transfer to Childs High Interest Account

LGibson_2

Hi,
Pardon my ignorance if this is a big no no or against the rules on anything.
But could I put a lump sum out of my current low interest savings into my childs high interest savings account for the end of tax year interest rates to get the most out of my money?
Then close the account, take the interest and money out, put it back into my current savings and then re-open another kids savings account?

Thank you in advance for any input.

eskbanker

Parents thinking of using savings accounts in their children's names need to be aware of the £100 rule:

If money is given by a parent or step-parent (not grandparents etc) and the interest earned on it is over £100/year from non-ISA savings, the whole thing is taxed like it's the parent's cash.

And it's not completely clear to me if you're suggesting otherwise with your reference to taking advantage of 'end of tax year interest rates', but to earn a year's interest (in any account), the money needs to be in there for a year....

Flobberchops

Banks are wise to the obvious trick of putting big temporary sums into child savings accounts with preferential interest rates which are intended to encourage relatives to build a nest egg and the young'un themself to develop a savings habit. While gaming the system is not against Ts&Cs per se, remember banks are within their rights to give notice of account closure for any, or indeed no, reason. Proceed accordingly!

Alexland

Flobberchops wrote: »

Banks are wise to the obvious trick of putting big temporary sums into child savings accounts with preferential interest rates

Surely they control this by implementing contribution limits rather than trying to make a judgement on the motives of the contributor? In addition to the £100 rule and the daily interest calculation the other concern could be that you are gifting the money to the child and then abusing the trust to steal it back again. Depending on the age of the child they might even have access and not want to give it back!

Flobberchops

Alexland wrote: »

Surely they control this by implementing contribution limits rather than trying to make a judgement on the motives of the contributor? In addition to the £100 rule and the daily interest calculation the other concern could be that you are gifting the money to the child and then abusing the trust to steal it back again. Depending on the age of the child they might even have access and not want to give it back!

Yes, to a degree. Contribution limits certainly come into play with child regular savers, most of the ones I know of limit deposits to £100 a month. But the kind of instant access child savings I'm thinking of often have either a very high upper limit or in some cases no limit at all - in part because I believe these are the banks' provision for child trust accounts, as in the situation where a billionaire spinster great-aunt dies and a large sum is held in trust for a child to the age of 18.



I've seen examples of parents using such accounts (which pay on the order of five or more times better interest than the equivalent adult instant savings, and around double the interest of a market-leading instant access cash ISA, while not being restricted by annual subscription limits) to park deposit money in the six months before completing on a house sale, for instance. Mathematically it makes complete sense for the customer, but it's not really the intended purpose of the account and has very little value to the bank; the higher interest rate being a loss-leading inducement to try to secure customer loyalty.


Some banks like Halifax discourage exploitation by only paying the headline interest rate on the first, say, £5000 and a more standard instant cash rate on the rest. Others like Barclays and Metro pay the full rate on whatever the balance, potentially millions! And, yes, I've heard of instances where the bank has "on review, reached the difficult decision to cease the banking relationship" with the opportunistic parents. I don't expect there are any hard and fast types of account activity that will trigger such a review, and indeed I'm sure many people happily rake in their child's interest for years without their accounts being flagged. Still, I would advise caution and moderation. Use, don't abuse, the banking facilities on offer.

AnotherJoe

I wonder where a parent would stand legally if say a 18 year old demanded back the tens of thousands of pounds their now estranged parent had obviously stolen from them judging by the record of their savings accounts?