Anger as Halifax allows savings rates to slip

Banks can use a loophole in the banking code to avoid warning customers their accounts are effectively obsolete. And the Halifax stands accused of using it - on deals offered to youngsters.

Under the banking code, customers whose accounts have fallen significantly compared with Bank of England base rates need to be notified within a reasonable time only if they have £250 or more in the account. This level can rule out many accounts held by children as well as those owned by the least well off.

The ombudsman has also said banks should notify customers when an account is replaced with a new deal, offering higher interest but with similar conditions, offering penalty-free switching.

In November 2001, Halifax set up Save4it, a pocket-money savings account designed especially for children up to 16. It now pays an attractive 4%.

But that is around twice the rate paid on the old account offered to children.

Halifax did not automatically upgrade holders to the new account even though it wrote to inform savers.

Jobs & Money reader Margaret James from Bedfordshire, whose two children each had around £150 in accounts, is particularly aggrieved.

"Halifax took a policy decision to begin marketing a new children's account, and to let the rate on existing accounts fall substantially below. This obviously disadvantaged our children," she says. "We immediately switched to the new accounts when we discovered this but Halifax should have alerted us to this change."

Halifax offered the family a savings review but it says travel costs to a branch would outweigh annual gains.

Halifax adds: "As part of our normal annual mailing we wrote to the family in April 2002 and again in April 2003. Interest rates for all Halifax accounts were sent on both occasions for comparison. We cannot change customer accounts automatically without their consent."