A parent's guide to hurdling fences at National Savings: A big increase in minimum deposits on accounts has outraged many, writes Vivien Goldsmith

IN FEBRUARY last year, National Savings increased the minimum deposit in the ordinary account from pounds 5 to pounds 10, and the investment account from pounds 5 to pounds 20.

This seemingly small change has outraged parents trying to teach their small children the virtues of saving.

Peter Fiddeman, from Broxbourne, Herts, said: 'Even the most thrifty child would lose patience before such a sum was accumulated.'

So he closed the accounts and opened new ones for his children with the Royal Bank of Scotland.

Even the postmasters are displeased with the change. Colin Baker, general secretary of the National Federation of Sub Postmasters, which has 16,000 members, said: 'We don't like it at all. We think the Department of National Savings has lost direction.'

National Savings said it made the change to save costs. A spokesman said: 'We are a government department, and as a government department we are asked to look at our running costs.

'We realised we could make savings by increasing the minimum purchase levels. Our main role is to fund government. We have to strike a balance between the interests of savers and taxpayers.'

So, in February last year, the minimum investments in the instant access ordinary account, the one month's notice Investment Account, and Premium Bonds were increased.

National Savings once scored over bank and building society accounts because the interest was paid without tax being deducted. Now non-taxpayers, including children, can register to have their bank or building society interest credited gross.

Post offices are also convenient as every small town and most villages will have one. But parents are discovering that the rates on offer in the high street compete with National Savings.

Halifax is Britain's largest building society, with more than 700 branches. There is no minimum for over-the-counter transactions. The instant access Little Xtra account is for the under-10s, and the Quest Account for 10-15-year-olds.

Some parents have decided to dodge the National Savings restrictions. If the account can stand the strain, the way to deposit pounds 1 in the ordinary instant access account is to withdraw pounds 10 and deposit pounds 11. Otherwise parents can use their own pounds 10 to make an pounds 11 deposit and then withdraw the pounds 10. The ruse is too cumbersome to work with the investment account where a month's notice is required.

National Savings has been swept into the fight against money laundering by those dealing in drugs or profiting from crime. An EC directive requires organisations such as banks and building societies to check the identities of depositors. Those investing in the ordinary and investment accounts - but not bonds - must provide evidence of identity and proof of address.

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