Several studies have found that over the last couple of decades school fees rose more than twice as fast as Consumer Prices or Average Wages. Even if this trend does not continue, it is certain you will need much more than an average wage if that is what you are relying upon to pay school fees. Of course it is not just school fees to worry about. University Tuition Fees might be funded by Student Loans, but much of the cost around attending university is not. For most people some additional planning is required.
Whether investing a lump sum, or through a regular savings arrangement, spreading the load across a longer timescale will enable the investments to grow more effectively, making the project more manageable. Planning ahead also permits a longer-term investment strategy that should deliver superior returns. In any case, it is always important to match the investment portfolio’s risk to the school fees’ liability.
For those who have already missed the long-term planning boat, there are some other ideas worth looking at. Re-mortgaging, or drawing cash from a pension, can release a school-fee-fund. For the less adventurous this can be held in an off-set account, mitigating mortgage interest, but, for the more adventurous, it can be invested – ideally within a tax efficient wrapper – to produce returns more in line with school fee inflation.
It is also worth noting that each Grandparent can give up to £3000 per annum without incurring an IHT liability; an efficient way to transfer both cash and knowledge across the generations. A final thought is that around one third of private school pupils receive some sort of scholarship or bursary, so that is always worth investigating too.