View more on these topics

School daze

I would like to send my children to private school. Have you any suggestions on how I can calculate how much money I will need and give me some ideas as to how I should fund the fees?

My advice is to research your local schools and see what they currently charge for different age groups. Then ask what their history of fee increases has been. Remember that school fees generally rise at a much higher level than inflation as measured by the retail prices index because they are linked mainly to staff costs.

The Independent Schools Council ( estimates that fee increases for its schools in 2007/08 averaged 6.2 per cent. This could quite easily be higher for 2008/09. Think how much your energy and food prices have risen of late. Schools are likely to be suffering a similar increase in such costs.

Statistics from the ISC suggest that the average fee per term at an ISC school for 2007/08 was £3,751. This rises to £7,353 for a boarding school.

There are therefore huge variations in fees depending on the type of school, the location of the school and what age your child will start school.

Remember that you may also need to fund your children’s university education and should factor in an assumption of that cost.

The cost of schooling does not stop at the fees. Build in a contingency for uniform, sports kit, transport, school trips, lunches and so on.

Ask the school if it will accept payment up front for the year. You may find that it pays to accept its discount.

Certain schools are prepared to accept fee payments in advance for a child who will not be attending for many years. This has the advantage that you can lock into the cost today rather than risk above-inflation increases. However, clearly there is a risk that you will not eventually choose to send your child to that school.

There is definitely no one-size-fits-all solution to school fees planning and I would tend to avoid any investment products marketed specifically as school fees savings plans, particularly as these can be quite expensive.

The trick is to treat school fees’ expenditure like any other regular commitment. That way you can focus on making your entire finances as efficient as possible, rather than take a blinkered view. This goes for all aspects of personal finance, really. Make a coherent plan for the bigger picture, rather than lots of separate plans. Make sure that any investments you use are as tax-efficient as possible. Use Isa allowances on a regular basis. If you have savings accounts, make sure that they are in the name of the lower taxpayer to maximise your net return. Invest in National Savings & Investments’ index-linked savings certificates, particularly if you are a higher-rate taxpayer. Reduce the cost of investment by investing in index-tracking funds.

Make use of your capital gains tax allowances if you are able to.

Consider switching to an offset mortgage although not necessarily in the current climate. That way, you can draw down on the equity in your home if you have a lean year and then make overpayments if you have excess income.

If you have a big pension fund, you might take the view that you can increase your mortgage debt to pay school fees in the knowledge that your pension tax-free cash will be there to pay off the outstanding loan.

If you are a higher-rate taxpayer, imagine getting higher-rate tax relief on all your pension contributions, 25 per cent tax-free cash at retirement to pay off your mortgage and then an income from the rest of the pension fund that you deliberately keep under the higher-rate threshold to just pay basic-rate tax. That is a powerful combination.

What is quite difficult in practice is to work out the combined effect of all these ideas. Not all will be applicable in your case but it is possible to model different scenarios using financial cashflow analysis packages.

You can use assumptions for inflation, interest rates, investment returns, income, expenditure, retirement age and so on to model how your financial position will evolve. It is useful to visualise not only the longer-term picture but also the year-on-year cash in, cash out position and what effect changes in your assumptions would make to this.

The best solution is likely to be a combination of measures and will need to be reviewed regularly, particularly when your circumstances change.

Jason Witcombe is director of Evolve Financial Planning


Playing by the rules

I was pleased to be reminded of a set of rules that are all to easy to forget when markets prove as tricky as they have been. Originally laid down by Merrill Lynch’s Bob Farrell and styled as Ten Market Rules to Remember, they were designed as a guide to wise investing. Recently, the economics team at Merrill revisited these rules with the intention of applying them to current market circumstances.

‘How to…audit your auto-enrolment scheme compliance’

Avoid pension penalties with our auto-enrolment checklist

According to the Pensions Regulator’s annual commentary and analysis report released this month, 785 potential non-compliance cases were referred for investigation, with 23 auto-enrolment compliance notices issued. And they predict that the use of their statutory powers is only going to increase.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm