Several studies have found that over the last couple of decades private school fees rose more than twice as fast as consumer prices or average salaries.
In its most recent annual census*, the Independent Schools Council cited that the average private school fees rose to £17,232 per annum; an increase of 3.4%. Although it was noted this was the lowest rise since 1994, this was still in excess of inflation, which was approximately 2.5% over the same period.
If fees continued to increase at 3.4% per annum, the average cost of 14 years of private education, based upon this average fee, would be £302,541 per child.
While this may appear to be a daunting figure, it can be made more achievable with the right planning.
If you have a longer timescale you 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 to you, 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 this area 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 £33,684, whereas day-schooling was £14,562.
- Average fees also differ greatly between regions. In East Anglia for example the average was slightly lower at £16,452, however in in the South of England, total fees were higher at £19,734.
- 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 if 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. Regular gifts made out of income will also not be assessed as long as they do not affect the recipient'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 2018 available on www.isc.co.uk
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