Wealth planning issues of various kinds have been a real feature of our conversations with High Net Worth Individuals in recent weeks.
Private schools are reportedly seeing a wave of new enrolments from parents worried about their children falling behind during the pandemic. This is another area of financial planning and investments where wealth management advice proves its worth.
For many, the COVID-19 crisis has opened a chasm in educational standards between the private and public sectors. While there are certainly state schools doing an excellent job of providing (and enforcing) remote learning, parents have been loudly lamenting the differences in how schools are approaching the challenge – or, as some see it, how teaching unions are allowing them to.
Shockingly, research by UCL suggests that a fifth of school-age children were learning for less than an hour a day during lockdown, or even not at all, while in stark contrast private schools had been putting on full timetables in the digital sphere and making remote learning their new normal with enthusiasm.
Parents experiencing variable state provision are rightly worried, and becoming increasingly so as talk of second waves of the pandemic swirls
The long-term effects on the aspirations of children and their parents are set to be staggering. Parents experiencing variable state provision are rightly worried, and becoming increasingly so as talk of second waves of the pandemic swirls. With many working from home for the foreseeable future, they are also worried about the effects largely unoccupied children – often in their teens – will have on their careers and family harmony if further lockdowns take place.
The result has been a 30% surge in demand for private school places, with many people who had never even considered this route previously taking the plunge. And they have been making moves at speed: frustrated parents who didn’t want to wait until September are said to have been enrolling children right at the end of the summer term in unprecedented numbers.
No-one could fault the rationale and sentiment behind making the change. However, families must take full stock and gear up financially for what is undoubtedly a weighty financial commitment: according to the latest Independent Schools Census, average termly boarding fees range from £9,438 in the North East to £13,331 in London. Private education is also clearly a long-term commitment which is likely to feel irreversible once children settle and get used to the richness of education that tends to be the preserve of elite institutions.
A years-long boom in private schooling shows how much value parents already placed on the qualifications and cultivation the sector’s pupils receive. But on the costs side, the pandemic has also thrown many people’s sense of financial security into doubt just at the point when they feel private education is the only way forward. The prognosis for the economy remains impossible to call and the unprecedented black hole in the public finances has raised the spectre of tax hikes for the wealthy.
Enrolling a child (or children) in private school only to then have to remove them due to escalating costs is no-one’s ideal scenario, but with overall fees potentially north of £500,000 for each that is a worry even for the quite wealthy. Make this investment a more comfortable affair by having a plan devised for you which will save you both stress and money. Why not arrange a no-obligation discussion with a wealth manager today?
The good news is that multi-dimensional, multi-disciplinary planning is very much the metier of wealth managers, who can unite investment management, tax mitigation and cashflow modelling to create sustainable solutions.
Whether you are already on this path or just considering private education, consulting a wealth manager is invaluable since it is no use swapping peace of mind around your children’s education for worries about affording fees of up to £40,000 per child year in year out. The financial plan they create will reduce the strain, help you make appropriate investments and could even capture some serious savings.
For instance, if you are cash-heavy or receive a windfall like a bonus or inheritance, you could look into pre-payment (potentially years in advance) to lock-in fees. As these continue to rise, this option can provide a great sense of security as well as reducing costs.
Alternatively, other parents’ cash flow considerations will mean they prefer to build their strategy on a combination of long-term savings and a diversified investment portfolio. The long-term investment returns from this path could well outstrip any savings made by paying in advance. Embedding school fees into a holistic plan could also open up various tax-efficiencies too; income and gains can be generated tax-free through careful use of the dividend allowance and Capital Gains Tax exemption.
Families might also consider enlisting grandparents and other relatives, since their providing help can in effect be a way of passing wealth down the generations efficiently so that Inheritance Tax is minimised. This is a popular route, but one where it is essential to take professional advice so that all family members feel fairly treated and assets are protected in case of divorce and other troubles.
Conservatively, it could cost over £500,000 to privately educate just one child from reception through to university. So, while private schooling is likely to be the best investment you can make in your children’s future, committing to this outlay needs to be planned for with care so that this is a comfortable journey.
As with achieving all your financial objectives, the aim is to always have your wealth working as hard as it can, to reduce costs and taxes wherever possible and to have frank conversations that ensure the whole family are on the same page. Wealth management advisers are adept at facilitating all this – and may even be able to offer informal tips about the best schools too.
As with achieving all your financial objectives, the aim is to always have your wealth working as hard as it can, to reduce costs and taxes wherever possible and to have frank conversations that ensure the whole family are on the same page
If you would like to have a free, no-obligation discussion with an adviser about planning for school fees, let us arrange one for you without delay. Or to hear more about how wealth managers help families like yours, get in touch with our expert team.