By Charlie Weston Personal Finance Editor
Thursday May 19 2011
BANK of Ireland has defended its decision to pay an interest rate of just 0.5pc on its Young Savers account.
The account is aimed at children -- those making their Communion this month will receive an average of almost €500 in cash gifts, with many getting €700.
Regulators have been encouraging these children to save some of the money, although much of it is expected to be quickly spent.
Bank of Ireland pays interest of 3.6pc to adults prepared to lock their money away for a year. This is seven times more than the bailed-out bank pays on its Young Saver account.
Last night, the bank said the European Central Bank rate was historically low, which is reflected by the interest rate paid on its Young Saver account.
"This account is an instant access account and the rate also reflects that.
"We would discourage any customer from using this account for the investment of a lump sum as we have a wide range of other accounts more suitable to generate a return," the spokeswoman said.
Simon Moynihan, of comparison website Bonkers.ie, said: "Bank of Ireland says it pays out the interest four times a year on the Young Saver account, but with such a low rate people who sign up for this account are likely to be disappointed."
At the other end of the scale, Permanent TSB Children's Safari Saver Account has the highest interest rate with 3pc on balances up to €20,000.
The EBS Children's Savings Account pays 2.35pc. There is a €20 bonus added to the account after six months. A maximum of €5,000 can be deposited.
Ulster Bank's Urfirst and Urmoney accounts pays 2.31pc, according to Bonkers.ie.
The Junior Savings account on offer from National Irish Bank pays between 1.35pc and 2.10pc for deposits over €1,000.
AIB's Junior Saver pays 1.26pc and is adding €10 to new accounts until May 31.
The An Post ChildCare Save Account pays 1pc.
Credit unions also add €10 to new accounts.
Some credit unions will offer a 2pc deposit account to young savers with a minimum requirement of keeping the money in the account for 12 months.
- Charlie Weston Personal Finance Editor