NW Brown writes:
In its most recent annual census*, the Independent Schools Council cited that the average private school fees rose to £17,870 per annum; an increase of 3.7% between April 2018 and April 2019. This was still in excess of inflation, which was approximately 2.1% over the same period.
The average increase since 2010 has been 3.9% per annum. If fees continued at this rate, the average cost of 14 years of private education, based upon this average fee, would be £324,643 per child.
While this may appear to be a daunting figure, this can be made more achievable with the right planning.
For those with a longer timescale one could consider the investment of a lump sum, or a regular savings arrangement. Historically, investment returns have also outpaced inflation over the longer term, and could therefore help you achieve the required fees.
If you have a shorter time horizon to save, there are still options available. However, the appropriate action will vary greatly depending on your individual circumstances, such as your existing assets and liabilities, income and outgoings, your attitude towards risk, and your capacity for loss.
If you are considering funding private education, it may be worth considering the following factors to help you clarify your specific needs:
- Fees vary greatly between boarding and day schools. In the census, the average boarding school fees were £34,695, whereas day schooling was £14,289.
- Average fees also differ greatly between regions. In East Anglia for example the average was £14,724 for day schooling, however in in the South East of England, total fees were higher, at £15,780.
- Approximately one third of private school pupils receive a form of scholarship or bursary, so it is certainly worth investigating what may be available to lower the overall costs. Scholarships won may also assist students when applying to University.
- Grandparents, or other relatives who are looking for an Inheritance Tax efficient method of gifting to the next generation can make use of their tax allowances by assisting with school fees. You are able to gift up to £3,000 per tax year, without it being assessed for Inheritance Tax purposes, and regular gifts made out of excess income will also not be assessed, as long as they do not affect the donor’s quality of life.
- Fees in Advance Schemes may be available, whereby you pay some or all of the school fees in advance as a lump sum, in return for a discount. This can be used as an Inheritance Tax mitigation exercise, as lump sum payments may be classed as a Potentially Exempt Transfer (PET) which, after seven years, becomes excluded from your estate.
At NW Brown we are very familiar with advising on the various methods available for funding private education for your loved ones.
As a part of our Wealth Management service, our advisers will be more than happy to discuss the available options, and work with you to formulate a plan to help you meet these financial objectives.
*LSE Census and Annual Report 2019 available on www.isc.co.uk
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