17th February 2017
It is important to understand the costs and implications of funding private education for your children.
It is a major financial decision that will shape your whole life. If you get it wrong, you could end up selling your house and having to take your children out of school. Here are some tips for planning the payment of private school tuition fees:
School fees have risen and will continue to rise well above inflation
UK Independent education is in demand. Many oversees parents wish to educate their children in the UK and can easily afford to pay. Independent schools are competing with each other and strive to offer the best opportunities and facilities.We advise you plan for a school fee inflation rate of 6%.
Plan for additional costs
It’s easy to underestimate the full cost of educating your children privately. School uniforms, books, equipment, extra-curricular activities and school trips all need to be considered.Allow for a minimum of an additional 10%.
Proximity to the school of your choice is likely to save considerable money; travel costs can otherwise be significant. Boarding is likely to double the cost of private education.
If provision of school fees depends on continued income from employment, you will need to think about taking out permanent health and critical illness insurance as well as life cover.
Most grandparents will be planning to leave their estate to their children and grandchildren. By making gifts directly to grandchildren to pay for school fees, inheritance tax can be reduced and funds can be made available when they are needed.Equity release can free up additional funds, but you should seek professional advice from a specialist to ensure any saved inheritance tax far outweighs the cost of the scheme.
Bursaries and scholarships
Most independent schools are run as charities. To maintain charitable status, they provide means-tested bursaries and/or scholarships. The discounts offered can be generous. We recommend you talk to bursars and admissions staff to establish whether your child qualifies.
Spread the cost
Spreading the cost of school fees makes them more affordable. A secured loan against property is an efficient way to generate funds for fees, whilst increasing the time to pay them.
There are many tax strategies than can be deployed, depending on your personal circumstances. Business owners will have more options to minimise their tax whilst paying for school fees.Using the maturity of your pension to pay off outstanding school fee debt is one of many tax efficient techniques that can be used.
Negotiate with the school
For those who have the capital it is worth considering negotiating with the bursar. If the school is looking to fund new developments, they may well be prepared to offer a generous discount for prepayment of several years of fees, rather than taking out a bank loan.
Always use an independent financial adviser
Using an independent financial adviser will not only ensure you get independent advice, it won’t cost you any more than dealing with product providers yourselves.Financial advisers are able to select products from the entire market-place, many of which aren’t available directly to the public.Specialists in school fees planning will have knowledge of proven strategies and will have the necessary experience to provide a solution bespoke to your needs.