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Once you have made the decision
to educate your children privately, your next task is
to do your sums. It is crucial that you have a clear
strategy to cope with the continuum of future fees.
We can help you look at the various options available,
whether you have capital to invest, intend to save regular
amounts or require an alternative solution.
You can expect to pay between
£700 to £1,200 per term for pre-prep (ages 2-7) schools;
from £1,200 to £4,000 per term for prep/junior (7-13)
schools; and from around £1,600 to £5,000 per term
for senior (11/13-18) schools.
Source:
ISIS 2000
Fees for boarding tend to be
about double those for day pupils, and girls' schools
tend to be slightly cheaper than boys'. So you could
be committing yourself to anything from £2,000 to
£15,000 per annum, not including uniforms, sports
equipment or charges for extra-curricular activities
- extras that can increase the total cost by 10 %
or more.
Studying your options
With any investment much will depend on your attitude
towards risk-for-reward. As a general rule of thumb
capital investment schemes require a minimum term
of five years. However, if you require access to money
immediately, this will not be a viable option.
A good place to start could
be investing through a unit trust or investment trust.
Some providers offer schemes specifically tailored
to the needs of parents saving towards school fees.
Unit trusts and investment trusts allow you to vary
the payments that you make and you can choose to invest
either lump sums or via a monthly savings scheme.
With-profits
If you are saving over the medium- to long-term, with-profits
bonds can be another suitable investment vehicle.
Typically you will require an initial investment of
around £5,000 or more, or you could make monthly contributions.
However, with-profits bonds are relatively secure
and, in most circumstances, no capital gains tax is
payable on the proceeds.
Zero dividend preference shares
of split capital investment trusts provide a fixed
capital sum, which is paid at a specific time in the
future. Although there is no guarantee, you could
buy a series of zeros to mature each year to meet
the fees liability.
A deferred temporary annuity
is another possibility. Monthly premiums are paid
into a deferred annuity that guarantees a fixed level
of fees when required. It guarantees a minimum return,
even if this is often low. A proportion of the income
paid out by the annuity would be subject to income
tax.
Tax-efficient wrapper
Individual Saving Accounts (ISAs) can provide an excellent
vehicle for saving towards school fees. Individuals
can each invest up to £7,000 a year in a tax-efficient
wrapper.
Equity release
Many parents who want to provide their children with
a private education use the equity in their homes
to fund fees. Basically this means negotiating a borrowing
limit above your current loan, which you only draw
on when you need it.
This is not a definitive
list to school fees funding. However, it does provide
an insight into some of the possible solutions. If
you have decided to educate your children privately,
we would like to have the opportunity to discuss the
options available to you - please e-mail
or contact us for further information.
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