With the right financial advice, foresight and planning, parents and grandparents can beat the rising cost of school fees
Calls from politicians to strip private schools of their charitable status have put fees firmly in the spotlight. More children than ever are entering private education but removing this tax break and enforcing independent schools to pay VAT, will likely trigger much higher fees.
The latest figures from the Independent Schools Council show that the average term fee stands at £5,218, or £15,655 a year. Given that most children spend 14 years at school from reception through to the upper sixth year, it (already) adds up to parents and grandparents paying hundreds of thousands of pounds in school fees by the time their children and grandchildren pick up their ‘A’ Level results. And that’s not all. Fees don’t typically include extras such as uniforms, sports activities, breakfast clubs, school trips and music lessons – they can easily add another 5-10 per cent to an annual bill.
Working out how to pay fees is often left by many parents until they begin actively looking at schools – although the earlier you start planning, the better. Getting ahead by saving or investing as soon as possible can help you reduce the burden of fees, but you’ll need to invest sizable sums to make it worthwhile.
To give you an idea of how much you’ll need to save, investing £1,666 per month (the current Isa allowance of £20,000 over 12 months) before charges in the five years before your child starts school could generate a pot worth around £109,920 assuming growth of 5 per cent a year. Start investing seven years before the first school invoice arrives and that could generate a pot worth £159,875 based on a 5 percent annual return.
Given the huge sums involved in paying school fees, we find that grandparents are increasingly looking to help. It can be a financially intuitive move as well as a generous one. Grandparents have several options, which can also help mitigate potential inheritance tax (IHT) liabilities too. Here are three of them: