Postgresql Database creation failing with UTF8 encoding

The error message is:

Creating PostgreSQL database openerp7 .. .. PostgreSQL database failed! : SQL create database "xxxxxx" with owner="xxxxxx" encoding 'UTF8' failed : new encoding (UTF8) is incompatible with the encoding of the template database (SQL_ASCII) at /usr/share/webmin/ line 1360, line 1.

Does anybody have a tip on how to fix this?