Investing a lump sum to pay for school fees?

[FeelingRatherClueless]

We have been lucky enough to have been gifted a significant amount of money which should cover school fees for DC up to 6th form (even taking into account annual increases).

Does anyone have any advice on how best to invest this so that:

a. We can take out so much each term for fees and leave the rest untouched
b. It's not tied up if our circumstances changed and we needed the money (it has been given to us to do as we wish rather than to DC)
c. The capital would earn a decent rate of interest but without a high-risk investment

I know it's a lovely problem to have but want to make sure that we do the best thing so any advice would be appreciated.

[Sijeunessesavait]

What a great gift! If your DC are already at the school, you should ask if they have a scheme for paying fees in advance - many schools offer significant discount for this which will probably be better than any interest rate on offer, and is without tax implications.

Hope that helps, though it doesn't take into account your point (b).

[utopian99]

Looking at the same question. My parents set up a fundfor us - mmanaged shares etc. I have to call the company now to see about one for ds and any future others, so will try to remember to share what they say..

[Notmadeofrib]

Look at a structured product. Deposit based to offer FSCS cover. This can give you upside exposure to the stock market without downside risk of capital loss. In the shorter term (

[TippiShagpile]

If you pay a couple of years up front you can get a pretty chunky reduction in fees which will more than match any interest/gains you are likely to get - might be worth having a chat with the school and see what's the best they can offer.

[bonvivant]

I wouldn't suggest you pay school fees upfront unless you are sure what happens if your DC leave the school for any reason. Children do leave private school whether by choice, change in circumstances or because they are asked/persuaded to leave and you don't really know what will happen down the line.

[TippiShagpile]

Paying up front has worked for us - either one year or 2 years up front (with a trust structure in place to protect our money) and we're saving 7.5 - 10% per year.

You've got to do what works for you/what you feel comfortable with.

[Notmadeofrib]

You mean a personal trust from which you pay the school fees tippi?
The trust can still be owed money though if the school fails they will be a creditor too (I'm not aware they have priority).... or am I misunderstanding? I agree prepaying is a good short term 'saving' solution so I just want to understand if I'm missing a trick!

[TippiShagpile]

No - I have set up a trust mechanism with the school in case of the school's insolvency etc. A lot of schools won't agree to that because you are in effect retaining ownership of the money but luckily for us ours does.

[Notmadeofrib]

Ah right yes I see. Are you and say the bursar trustees and you agree a loan to the school for x period that is recalled if they go into admin? (Thinking they want to invest and use the money and not just have it sitting there paying tax on the growth).

Thanks for answering BTW, very interesting.

[TippiShagpile]

I've given the school money which they hold on trust so that if they do go into any form of insolvency procedure I might be protected. I say might because it's certainly not a given and I am completely aware that this mechanism is open to challenge by other creditors/ insolvency practitioners.

However, it's worth the risk for me because of the discount we get by paying up front even just for a year or two. The school is almost full with waiting lists for most years so I feel relatively relaxed about the question of its solvency.

[Notmadeofrib]

Thanks Tippi

[ChocolateWombat]

These schemes for fees in advance certainly allow you to get your money back if you leave, subject to having given a terms notice or paying fees for a term in lieu of notice.
People change jobs and move areas, circumstances change etc etc....people move all the time and schools know this. It is useful for them too have the fees ina dance and they won't attract any if the fees are so tied up people are not able to leave the school if they need to.
It would all be laid out in the terms and conditions.