Halifax slashes top Junior ISA rate to 4%

Updated: 

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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.

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Junior ISAs

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.

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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. 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



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