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How to pay for private school fees

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Written by:
04/09/2017
News that private school fees have risen by more than a fifth in five years while wages have remained stagnant will come as no surprise to over-burdened parents.

 

Many parents are already struggling to pay the fees, with many schools operating a ‘distress fund’ for parents having difficulties.

There is no magic bullet to paying for fees, but here are some ideas to ease the burden:

–          Plan early – this is easier said than done, but if you have an inkling you’d like to send your child to private school, starting from birth gives you the best possible chance. £1,000 a month from birth would give you a pot of £70,000 by the time your child reaches the age of five, assuming investment growth of 5%.

–          Use your ISA. Parents can invest around £40,000 per year. You can use this to build a tax-free income stream to help pay fees. Junior ISAs and Child Trust Funds will not help as these do not allow access to the finances until the child is 18 and even then, the capital belongs to the child, who may not necessarily want to spend it on their education.

–          Cash won’t help. If you are lucky enough to have built up a pot rather than having to pay fees out of income every month, then you need to be in investments that protect you against inflation – that is likely to mean including some dividend paying stock market investment.  Investment trusts are usually a good low-cost option, such as Bankers Investment trusts or RIT Capital Partners.

–          If that feels too risky, try to secure the best fixed rate bond you can, or use an ISA. Alternatively you could buy a UK government bond. These can be bought through the government’s debt management office or through various broker sites, such as Hargreaves Lansdown.

–          Check whether your chosen school offers an ‘advanced fees’ scheme. This can offer a return of around 3-3.5% in exchange for paying a set number of terms’ fees upfront. Here is an example for St George’s Weybridge.

–          Tap up granny and grandad to help with the fees. Investment adviser Towry reports that 8% of grandparents contribute directly to their grandchild’s school fees. It can even by efficient from an inheritance tax planning point of view, but it is best to consult an adviser.

–          Childcare schemes can help you in the early years. Some nursery and pre-prep schools will accept childcare vouchers and their updated equivalent – the Tax-free Childcare scheme.

–          Maximise scholarships – Scholarships are not usually means-tested, but can reduce fees considerably. They are awarded for academic achievement, art, sports or music. Around one-third of all independent school pupils receive some sort of help with their fees. Bursaries are also available, but tend to be means-tested. There are 43,563 pupils receiving means tested assistance, with 41.6% of these pupils having more than half their fees remitted. Parents should also check whether they qualify for HM Forces discounts, staff discounts, sibling discounts or clergy discounts.

 

 

 

 

 

 

 

 

 

 

 

 

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