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Planning for school fees - what are the options?

PUBLISHED: 16:55 18 October 2010 | UPDATED: 17:59 20 February 2013

Planning for school fees - what are the options?

Planning for school fees - what are the options?

Personal finance editor Adam Aiken has some advice for parents

Personal finance editor Adam Aiken has some advice for parents




The economic problems of the last couple of years will have hit the education of some pupils. With more people out of work and the bonus culture in the City coming under the spotlight, the school fees of many parents will have come under pressure.
Even in the good times there are individual cases of financial difficulty, but the downturn will have made the problem more widespread over the past two years or so.
It shows the importance of long-term planning if you want your child to benefit from independent education. If you rely instead on your cashflow continuing while your son or daughter is at schooling, you risk having problems if your circumstances change.
"If you are thinking of private education for your children, it pays to start planning early rather than wait until you have decided on a particular school, said John Mee, of Lovewell Blake Financial Planning.
Many parents will be only too aware that school fees have risen ahead of inflation over the past 10 years, which makes it even more important to plan early.
"Endowment policies were once a popular route with many families," said Mr Mee.
"Some began taking out endowments when the first child was a few months old, frequently maturing 10 years ahead. With endowment providers declaring strong annual bonuses for such policies, this seemed a sensible route.
"But with the stock market crash of 2000, and particularly the extremely low bonuses offered on endowments today, this type of saving has become discredited."
However, there are various other long-term savings options that can help with your planning for school fees. For example, all taxpayers are allowed to save 10,200 a year into a tax-free Isa (and, of course, you can double this by both parents taking up the full amount). And grandparents can cut their inheritance tax liabilities by contributing to a trust for the payment of school fees.
There is also the option of older parents using pension contracts or self-invested personal pensions (Sipps) to help with fees, Mr Mee said.
David Lyscom, the chief executive of the Independent Schools Council - the sector's umbrella group - has stressed that pupil numbers in the private sector held up well during the recession, which suggests that there has been at least a degree of sensible planning by parents.
But given the shaky state of the economy, that sort of long-term planning looks set to be even more crucial in future.

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