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School fees are soaring – so plan ahead

Parents with children in private education will be well aware of the significant financial commitment involved. According to the Independent Schools Council (ISC) average termly fees for senior day schools are now £3,992 (£11,976 pa) and £9,038 (£27,114) for boarders – but fees can be considerably higher for the UK’s most illustrious public schools. And none of this includes the additional costs of uniforms, books and expensive school trips.

Jason Hollands Jason Hollands
21 February 2014

Indeed the cost of private education has soared over the years, potentially putting private education out of the reach of many otherwise affluent parents unless they have planned well in advance. According to the ISC, private school fees have on average risen by 24% over the last five years, which is significantly ahead of inflation and despite the fact that real earnings have yet to recover to the levels they were at prior to the ‘credit crisis’.

No wonder then that one recent survey found that four out of ten parents are considering removing their children from fee paying education under the burden of rising costs.

For parents aspiring to a private education for their children, it is vital to plan well ahead in order to ease the financial pressure later on. To help people work out the level of savings required, we have developed an easy to use, free Saving for Education Fees tool which can be found here.

In reality it is often grandparents that play an important role in helping out with school fees. In the process of supporting their grandchildren, this can also help mitigate a future Inheritance Tax (IHT) liability. Increasing numbers of people are being drawn into the IHT net as a result of a pincer movement from rising property prices and IHT allowances that have been frozen at £325,000 per person since 2009.

It is possible for grandparents to give up to £3,000 pa away with it falling immediately outside of their estate and they can also make “regular gifts out of surplus income” which will immediately be outside of their estate providing they really are regular (i.e. at least once a year) and do not adversely affect their standard of living. Any other gifts are “potentially exempt transfers” – which means the benefactor must survive seven years for the gift to be completely free of IHT.

In summary while the costs of a private education represent a considerable financial challenge, even for high earning professionals, careful planning can help turn aspirations into reality.

If you are interested in establishing a school fees plan for your children or grandchildren, why not contact one of our wealth managers in your area? Call us on 020 7189 2465 to make an appointment.