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Major life events|Money management

4 ways to prepare for increasing private education fees

July 10th, 2024.

Recent research has revealed that the cost of sending two children to a private day school could cost over £1 million1.

With the looming threat of the discontinuation of VAT exemption on private school fees and ever-increasing school fee inflation, the cost of private education has never been higher.

The average fees for private day students increased by 8% for the 2023-24 academic year to £18,064 and 9% for boarding school fees, to an average of £42,259 per year2.

For many, such a significant increase in costs per child is likely one that hasn’t been accounted for and it has been a topic of conversation with many clients since the Labour party announced its intensions to scrap the VAT exemption last year.

The positive news is that there are options available to help you prepare for increasing private education fees. The key is to plan ahead where possible.

1. Pay for fees upfront
While this option has a high initial cost, paying for school fees (or as much as possible) upfront for the rest of your children’s private education may save you a significant amount in the long term.

2. Consider your savings alternatives
School fee inflation continues to remain at stubborn levels and so it is important to plan ahead to help minimise its effect on your savings.

Covering the costs upfront might not be an option for you. If this is the case, then reviewing your savings and considering an investment strategy may be a suitable alternative, but this will depend on your risk appetite. With a realistic time horizon, investing can help you achieve this goal.

By working with a wealth planner, you will be guided on how to structure your investments to maximise your tax efficient options. This can extend to include the use of ISAs, pensions, offshore insurance bonds and trusts.

There will aways be an element of risk when investing and the value of investments can go down as well as up. If you are not comfortable with the potential for loss, you can alternatively put your funds on deposit over a number of different terms and lock in a fixed rate, which will help to mitigate the effects of inflation to a degree.

3. Plan ahead for the next generation
It may be that your children or grandchildren are not yet at the age when paying for private education is needed, or you might simply want to consider your options for when these fees do become payable. If that’s the case, then it isn’t too early to plan.

Passing wealth down your family’s generations can also be used to help cover the cost of private education. If this is something you would like to consider then it’s important to give thought to the best

timing for both you and your family and to think about the use of gifting rules and allowances as well as the use of a structure such as a trust or family business.

4. Review your wealth plan
The benefits of having a wealth plan is that it can give you the flexibility to adapt and change course in situations where unexpected costs – or income – might arise. A wealth planner is there to guide you through scenarios such as this and can help you regularly review, adapt and replan your wealth in a way that helps you make your money work for you.

As always, there’s no one-size-fits-all approach and we strongly recommend speaking with your private banker and wealth planner to understand which approach works best for your own position.

1 Private school bill for two children could hit £1.2m under Labour (thetimes.co.uk)
2 Number of private school pupils rises despite claims families priced out by Labour’s VAT plan | Private schools | The Guardian