Congratulations, your savings rate just dropped

I discovered yesterday that my teenage son, who has had a SaveZone account with the Bank of Scotland (BoS) for over three years, had received a letter informing him that his account was being transferred to a Halifax Instant Saver account.

The letter was congratulatory and reassuring in tone, informing him that he needed to do nothing to 'enjoy the benefits' of this new account.

My son pays in ?5 a month, by standing order, from his current account (also with the BoS/Halifax) and has never withdrawn any money from it - so he uses it as a long-term savings account and nothing else. The only apparent 'advantage' of this new account is that he will be able to withdraw money from it 'from over 44,000 cash machines' in the UK (with his SaveZone account he could only withdraw money from BoS machines)

However, a disadvantage, which the letter did not draw his attention to, is that, instead of an AER of 3.75%, the Instant Saver account only offers an AER of 0.25% on balances under ?500.

Being a typical teenager he did not notice this and just threw the letter away. Fortunately I came across it and read it.

It appears to me that this is a cynical way for the bank to deprive a large number of children and young adults of a reasonable interest rate on their savings. Most young people will treat the letter in the way my son did and will not notice the huge difference in the interest rate - or at least not until they get a nasty shock when a staggeringly small amount of interest is added on at the end of the year!

The whole point in persuading my son to set up this savings account in the first place was to demonstrate to him the importance of saving money on a regular basis, a principle which has been repeatedly reinforced every time he gets a statement and sees his little nest-egg getting larger.

I think that this is something that parents of teenagers should be alerted to so that they can check the status of their children's savings accounts and have the chance to advise them, as I have done to my son, that they take their business elsewhere!

AF

Halifax spokesman Jason Clarke replies...

"We are sorry your reader feels this way and should like to assure her it is not our intention to transfer customers into accounts that pay lower rates of interest. Only a very small number will be affected this way and we are inviting them to talk to us about accounts that could be more suitable for them.

"As Bank of Scotland savings accounts transfer over to Halifax accounts, we use the account with nearest matching product features - so that the services they currently have are not affected. The Instant Saver account would actually pay a minimum of 2.00% gross on any balance as your reader's son is under 21. However, card-based accounts are not intended for longer term or regular savings and while it may be the closest match to his old account, it's probably not the best sort of account for him.

"The letter he has received also offers him the opportunity to talk to us about his account as we may have something more appropriate. Through our Saving and Investing Review, we have moved over ?35billion into better paying accounts in the last two years. In this instance, where he is saving regularly, he could get 5% gross by switching to the Halifax Monthly Saver account for his regular ?5 and 4% gross with a Web Saver account on anything else above ?1."