Nationwide is ‘on your side’, or so it likes to tell us. Despite that slogan, it doesn’t appear to be on the side of my six-year-old daughter, as the building society has wielded the axe on her savings rate.

We recently received a letter from Nationwide, after the thinnest of apologies it said the rate on the account would be hacked back from 2.5 per cent to 2 per cent.

That’s still pretty decent compared to adult savings rates, but this is a kids account and banks and building societies do tend to offer them a little bit more.

Nationwide revealed this week that it is being squeezed by a mortgage price war - it seems it is saving money where it can by cutting some savings rates

Nationwide revealed this week that it is being squeezed by a mortgage price war – it seems it is saving money where it can by cutting some savings rates

In classic ‘bank tells you its cut a savings rate’ fashion, this is the meandering explanation we got:

‘As a savings provider, we’re continually checking our savings interest rates, and this sometimes means having to make difficult decisions, such as lowering them – which is what we are doing now.’

It added: ‘If you want to keep your Smart Limited Access Saver account at the new rate, you don’t need to do anything. However, if you have parental responsibility for the child you’re saving for and they live with you at least some of the time, you might like to explore our Future Saver account. Or if you’d like to find a new home for these savings, we can help you move them to a different provider, although we’d be sad to see you go.’

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What you may think is missing in this letter is a proper explanation as to why Nationwide has taken a whole 0.5 per cent off the rate of a savings account for children.

There’s also another fairly important bit of information people might like to know: what’s the difference between the Smart Limited Access Saver and this Future Saver they mention – and, crucially, what rate does the latter pay.

I would have preferred the letter to include that rather than some ‘We’ll always be here for our members’ gubbins at the end.

Nationwide's letter explaining that the rate on our daughter's account would be cut

Nationwide’s letter explaining that the rate on our daughter’s account would be cut

A quick search revealed what I would have liked Nationwide to tell me.

The Smart Limited Access Saver can be opened by any adult for a child, or by a child or young person themselves, and have up to £50,000 in it, with the rate cut if more than one withdrawal is made per year.

The Future Saver can only be opened by an adult for a child they have parental responsibility for and who lives with them for some of the time, and can have up to £5,000 in it, with the rate cut if more than one withdrawal is made per year.

The Future Saver therefore has a much lower limit on savings and can’t be opened for a child by other relatives, such as aunts, uncles or grandparents.

Intriguingly, however, it does pay a potentially higher rate of 3.5 per cent if the adult has a main current account with Nationwide, or 2.5 per cent if they don’t.

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So, why on earth would you cut a children’s savings account rate when you still offer the same rate or better on another children’s savings account?

Well, here’s the the thing. Nationwide isn’t really offering that rate, because an email to its press office to ask that very question revealed something that it isn’t telling customers who might quite reasonably read their letters, go to its website, check the Future Saver out and open one: the rate on the Future Saver will also soon be cut.

It will go down from 3.5 per cent for main current account customers to 3 per cent and from 2.5 per cent to 2 per cent for everyone else.

That does, of course, mean that Nationwide current account holders can stillbag their children a better rate of return than the 2 per cent that the Smart Limited Access Saver is being cut to. So, why not just keep the rates level?

Firstly, I suspect because the Future Saver has a greater ability to stop people opening it to game the system and stuff their own savings in there, albeit tax rules already crimp this ploy.

Secondly, because the Future Saver limits the interest Nationwide will pay on kids accounts, in terms of balance and who can open one for children – and Nationwide is trying to save money.

It also knows that inertia means lots of people won’t actually move their child’s savings account and so it will cut costs there.

Nationwide’s results for 2018 to 2019, revealed this week how a mortgage price war is denting its profits – down to a mere £833million from £977million a year earlier.

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It’s trying to save money where it can. It seems a shame it chose a savings account for children as one of the targets though.

And it’s even more infuriating to be led a merry dance on the savings rate that you will get on the replacement. 





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