School Fee Planning FAQs
10 May 2012
submitted by Halcyon Independent Financial Advisers, Stratford Upon Avon
My son is now 3 years old and I would like him to educate him privately from age 11. Is it possible to build up a fund for school fees so that I will not have to pay these directly from my salary?
In short, yes it is…this is a great time to start saving towards private school fees. In fact, the earlier that you start to save the better. As you have a few years before you need to start paying private school fees, you can take advantage of some of the investment plans that are ideal for longer term savings. Paying private school fees from salary is possible for some people but for most of us, the more that we can save towards school fees the better. There are many different ways to start saving and it is down to your own individual circumstances which method or combination suits you best. Whichever route that you take, it makes sense to ensure that you use as many tax-free and tax-efficient savings plans as possible. The most overlooked aspect that we see with clients is that they forget to take out a small insurance plan to make sure that private school fees are covered should one of the parents die. It is a good example of a small detail that can make a large difference and an advisor should discuss this with you at the same time as you are assessing which investment routes suits you best.
Are there any tax concessions, or similar, that could be utilised to make the cost of private school fees less inhibitive?
Unfortunately there aren’t any direct tax benefits for private school fees planning and it is therefore really important that all of the other available allowances and tax efficient plans are used to save for school fees. Individual Savings Accounts are usually a good place to start your planning as they accumulate free of income tax. You should also be looking a menu of investment vehicles including National Savings, Unit trust, investment trusts and investment bonds. This is not a complete list of products but these are the most commonplace solutions that people use to save towards school fees.
Grandparents are often very keen to assist with school fees and it is a good idea to make sure that inheritance tax allowances are used effectively. It is really important to be aware that everyone will probably have a different approach and differing circumstances and an advisor will take care to ensure that your solution is appropriate for you.
The savings plan we had intended to pay for our daughter’s private school fees has not performed as well as we had hoped. How can we make up the shortfall?
This is a tricky situation to be in an sometimes the investment or insurance companies involved don’t make matters any easier when they suggest that payment s are increased! A sensible thing to do in a case like this would be to look at the reasons why the plan value is lower than expected. If this is something that can be remedied easily and without cost, then it may make sense to continue with the investment plan. However, it might be prudent to decline any offer to increase payments to the specific plan or investment and to save a little more elsewhere and spread your risk a little. Depending on how long it is before you need to start paying fees, then a good high rate deposit account may be a very good solution. Of course, the best protection against this situation arising is to frequently review the performance of your plans with your advisor and to ensure that you understand the details of your investment plans, making sure that you are aware of any potential pitfalls. Your advisor will work with you to try to minimize the chances of you having an unpleasant surprise when you require the money!
Halcyon Independent Financial Advisers is an appointed representative of Sesame Ltd. which is authorised and regulated by the Financial Services Authority.
Partners: Christopher G Pierson & T Paul V Barnes
Halcyon Independent Financial Advisers, First Floor Offices, 36 Greenhill Street, Stratford upon Avon, Warwickshire, CV37 6LE
Tel: 01789 262777 Fax: 01789 262888