Help in finding the fees Chris Procter, joint managing director of SFIA, outlines a planned approach to funding your child’s school fees Average school fee increases between the last year 2 school years, according to the ISC census, were 4.1%. This is lower than expected given the increased cost of Teachers Pension Scheme which came in last year. There appears to have been a conscious effort by schools over the last 10 years to control fees. Since 2010 fee increases have averaged 3.9%. Between 2000 and 2010 they averaged 6.6%. The latest Independent Schools Council (ISC) survey, conducted in January 2020 and completed by all 1,374 schools in UK membership, indicate that there are now a record 537,315 pupils being educated privately, the highest number since records began in 1974, rising 0.22% since 2019. Pupils registered to board stands at 13.0% with weekly and flexi boarding becoming increasingly popular. The percentage of pupils attending single sex schools stands at 24.5%, marginally lower than last year. The overall average boarding fee is £11,763 per term and the overall average day fee is £4,980 per term. However, fees charged by schools vary by region – for example, the average boarding fee ranges from £9,292 per term in the North East to £13,372 per term in Greater London; the average day fee ranges from £3,725 per term in the North West to £5,993 per term in Greater London. The overall cost (including university fees) might seem daunting: the cost of educating one child privately could well be very similar to that of buying a house but, as with house buying, the school fees commitment for the majority of parents can be made possible by spreading it over a long period rather than funding it all from current resources. It is vital that parents do their financial homework, plan ahead, start to save early and regularly. Grandparents who have access to capital could help out; by contributing to school fees they could also help to reduce any potential future inheritance tax liability. Parents would be well-advised to consult a specialist financial adviser as early as possible, since a long-term plan for the payment of fees – possibly university as well – can prove very advantageous from a financial point of view and offer greater peace of mind. Funding fees is neither science, nor magic, nor is there any panacea. It is quite simply a question of planning and using whatever resources are available, such as income, capital, or tax planning opportunities. The fundamental point to recognise is that you, your circumstances and your wishes or ambitions, for your
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children, or grandchildren are unique. They might well appear similar to those of other people but they will still be uniquely different. There will be no single solution to your problem. In fact, after a review of all your circumstances, there might not be a problem at all. So, what are the reasons for seeking advice about education expenses? • To reduce the overall cost • To get some tax benefit • To reduce your cash outflow • To invest capital to ensure that future fees are paid • To set aside money now for future fees • To provide protection for school fees • Or just to make sure that, as well as educating your children, you can still have a life Any, some, or all of the above – or others not listed – could be on your agenda, the important thing is to develop a strategy. At this stage, it really does not help to get hung up on which financial ‘product’ is the most suitable. The composition of a school fees plan will differ for each family depending on a number of factors. That is why there is no one school fees plan on offer. The simplest strategy but in most cases, the most expensive option, is to write out a cheque for the whole bill when it arrives and post it back to the school. Like most simple plans, that can work well, if you have the money. Even if you do have the money, is that really the best way of doing things? Do you know that to fund £1,000 of school fees as a higher rate taxpayer paying 40% income tax, you currently need to earn £1,667, this rises to £1,818 if you are an additional rate taxpayer where the rate is 45%. How then do you start to develop your strategy? As with most things in life, if you can define your objective, then you will know what you are aiming at. Your objective in this case will be to determine how much money is needed and when. You need to draw up a school fees schedule or what others may term a cash flow forecast. So, you need to identify: • How many children? • Which schools and therefore what are the fees? (or you could use an average school fee) • When are they due? • Any special educational needs? • Inflation estimate? • Include university costs?
