Savings changes

It may come as a surprise to the Post Office, but its new card based "Easy Access Savings Account" for children is being met with disappointment by some parents.

Like Working Lunch viewer David, from Lincolnshire. He's not happy with the new style rules, which exclude children saving under the age of 11.

Just recently, he opened a National Savings Ordinary Account for each of his children, aged seven and 10, only to discover that it's being replaced - and his children won't be welcome.

"It's almost a tradition that we all start off with an account at the Post Office," complains David. "I can see millions of people being affected by this."

Changes

The problem stems from the change to a new card based account, rather than the traditional passbook, and there are legal restrictions on who can be a card holder.

John Prout of National Savings & Investments explains: "The industry recommended best practice - not to issue ATM cards below the age of 11..., and banks have been criticised in the past for allowing cards to get in the hands of youngsters."

The key changes to the new account include:

a minimum age of 11 (there was none before)

a minimum balance of £100 (there was none before)

a minimum withdrawal of £10 (just 1p was allowed before)

The Post Office has its own reasons for making the changes though, despite its 140 year history of children's savings accounts.

With around 10m inactive accounts in existence, and some customers even needing to transfer money from pre-decimal into decimal, the decision was made to get things back in order.

Discipline

And there are some advantages to the new account.

It's run through a card, so you can get money out from all Link machines, and the interest rate goes up from 0.25% to a princely 1% when you've got savings of more than £1000.

This continues incrementally until with £50,000 you will earn the top rate of 3.55%.

There is also an alternative account for children younger than 11.

John says: "What I would suggest for most situations is our investment account, which is a passbook account and is available through post offices.

"It operates in almost exactly the same way as the savings account - There is a one month notice period but it's good discipline for children, who are often saving up for something."

Other options

But National Savings is no longer the only place for children to open an account.

Alliance & Leicester's First Save account offers:

a minimum balance of £1

a maximum daily withdrawal of £500

4.55% gross interest

a passbook only

Britannia Building Society's First Saver account offers:

a minimum balance of £1

no limit on minimum or maximum withdrawal

4% gross interest

a cash card at 12

And Nationwide Building Society's Smart-2-Save account offers:

a minimum balance of £1

a maximum daily withdrawal of £100

4.25% gross interest

a cash card at 12

If you already have a National Savings Ordinary Account, it won't be defunct after the 29 January launch of the new "Easy Access" account.

It'll carry on as an active account until July 2004, at which point it will be closed and you will just earn interest and be able to withdraw your cash.

If you're the right age, you can switch it to "Easy Access" of course, and all of this will be explained to customers in writing.