Tesco has announced a change to one of its ISA rates (Image: Getty)
Tesco has issued an unwelcome message to its customers warning them about a change which will come into effect in March.
The supermarket offers a range of financial products in collaboration with Barclays.
One of the most popular of these is the Bank Junior , which offers an of 4%.
But from March 19, 2025, Tesco announced it will cut this rate by 12.5%, down from 4% to 3.5%. The change will affect existing Junior ISA customers as well as new customers.
Over the course of a year, it means the amount of interest generated on a maxed-out ISA would decrease from £360 to £315, a drop of £45.
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Junior ISAs are savings accounts for under-18s which must be set up by parents or guardians in their name. They are effectively Cash ISAs for kids, and protect their savings from being taxed much like a Cash .
Many parents may not realise that savings for their children are subject to tax. Children can only earn £100 in interest in a given tax year before any extra interest is taxed at their parent’s income tax rate, which could be up to 45%.
This is partly to stop parents from stashing money in their kids’ accounts to protect it from tax, but it can mean parents are landed with an unexpected tax bill.
Junior , by contrast, shield all the money from tax. The only downsides are that the money is completely locked away – it is given to your child, and they will be able to access it when they turn 18, and the account will be in their name. It means you can’t get it back if you have an emergency and you can’t stop them blowing it on whatever they want when they turn 18.
A JISA has a maximum deposit of £9,000 each tax year. If this were maxed out from birth to 18, that would give them £162,000 tax free.
Tesco said in its announcement: “From 19 March, 2025 our is reducing
“We’ll be reducing the Junior ISA rate from 4.00% to 3.50% Gross/AER (variable) on all new and existing accounts.
“A Junior Cash ISA is a simple, affordable way to save for your child’s future if they don’t have a Child Trust Fund. The money in the ISA belongs to the child, who can withdraw it when they reach 18.
“Open your account with just £1, then save up to £9000 in the current tax year – this is the combined total you can contribute to a Junior Cash ISA and a Junior Stocks and Shares ISA.
“The current rules for ISAs are subject to change by HM Revenue & Customs and the value of tax benefits depends on individual circumstances.”