The bank has cut the bumper return on its best buy Junior ISA.
Halifax has cut the interest rate on its leading Junior ISA from 6% to 4%.
The variable account - available to young savers with a parent or guardian that holds an adult Cash ISA with the bank - has been a clear best buy since it was launched over two years ago.
But new young savers with a parent or guardian that fulfils this caveat will receive a much smaller rate of 4%.
Those that took out the account before the change will get the higher rate until January. Halifax says account holders will be sent letters nearer the time to alert them of the drop in return.
Halifax offers a lower 3% rate to children with parents or guardians that don’t have an existing account with the bank. This rate will remain unchanged.
Halifax said the move was to bring its Junior ISA in line with the competition and emphasised that despite the cut it still offers the best interest rate for Junior ISAs.
Junior ISAs
[SPOTLIGHT]Junior ISAs were launched in November 2011 to replace Child Trust Funds.
They allow parents or guardians of children under 18 to save cash or invest in stocks and shares, tax free, up to a fixed allowance (currently £4,000) each year.
At the moment there is a bizarre rule, which prevents parents or guardians opening a Junior ISA if their child already has or was eligible for a Child Trust Fund. This means money is essentially trapped in a zombie account.
But from April 2015 this block will be lifted, meaning those with Child Trust Funds will be able to move their money into a Junior ISA where rates are more competitive. Read Parents will be able to move Child Trust Fund cash into Junior ISAs for more.
The best alternative Cash Junior ISAs
If you want the best Cash JISA rate available from Halifax you’ll still need to have an existing or open a new Halifax adult Cash ISA.
But at the moment the return on adult cash ISAs from Halifax fall pretty short of the market leaders. Read The best Cash ISAs for more. With 2% lopped off the Halifax Junior ISA rate, the trade off might not be so appealing.
So here are some of the best alternative Cash Junior ISAs to consider for young savers.
|
Account |
Interest rate (AER) |
Minimum deposit |
Transfers in allowed? |
Account management |
|
Nationwide BS Smart JISA |
3.25% |
£1 |
Yes |
Branch or online |
|
Coventry BS Junior Cash ISA |
3.25% |
£1 |
Yes |
Branch, phone or post |
|
Mansfield BS Cash Junior ISA |
3.05% |
£1 |
Yes |
Branch or post |
|
Skipton BS Junior Cash ISA |
3.02% |
£1 |
Yes |
Branch or online |
More on savings:
The best instant-access savings rates
The best fixed rate savings accounts
Join SAM: cashback website designed to get parents saving for their kids