How beneficial to join a school fees in advance scheme?(16 Posts)
We may consider private education in the future. I understand they do offer a 'fees in advance' scheme, whereby you pay a lump sum and somehow save money later. If this bring a significant saving, it might make private affordable for us in future.
Just wondered if anyone has experience of doing this and if you felt it was beneficial please, as what sort of savings are we talking about?
Do they work by you paying at current fee rates, so avoiding increases, or are they done in a different way. I assume they are most beneficial when fee increases are large (not so likely at moment) but then, interest rates gained from savings also tend to be larger when inflation is high.
Any experiences or thought gladly received.
I have no experience but would wonder about school closing, or school not being a "good fit" for DC, but you being tied in.
I'm not sure what you would describe as a 'large' fee increase, but there have been substantial fee increases in private fees over the last five or so years. Not necessarily linked to inflation, but instead due to increases in teacher's pension provisions, performance related pay and a race to improve facilities. Google it - 5% or more annually seems fairly standard.
This is something we are looking at for a long way off in the future! We are considering public schools so their fees are pretty steep. My understanding is it depends on how many years you would be paying for in one go. For example if you paid for the 5 years your DS would be at a traditional 13+ school, in advance, all five years are charged at the current yearly rate (so no fee rises) and then they appy a discount.
The discounts I have heard of have been between 10-25% you would be surprised that often it is the "big name" schools that apply the largest discounts and some of the smaller schools offer barely anything. Also I would suggest your money is "safer" in a big name school as it is less likely to have a financial crisis and you lose your money and the school.
What you need to consider is the schools individual policy on what happens to your money if you want or need to remove your child for any reason (bad fit, illness etc) or
however unlikely they ask your son to leave!
I don't know if this is the scheme you are thinking of or something entirely different, but at dd's school you can pay lump sum in advance and then get a discount off the fees (2 or 3%), however you do need to be already at the school.
Another local school had a scheme very similar to this, but unfortunately 4 or 5 years ago they went bust taking some parents fees with it! I don't know how much they were able to recoup. so be very careful how you part with your hard earned cash.
I think there are some financial advisers who specialise in this area (I was given details of a local one ages ago -but not needed as I had no spare cash!) so maybe worth investigating that, ask the school you are interested in, they are more than likely to have some ideas.
A school that I know gives a 2.5% discount if you pay the whole year upfront rather than term by term. I know others where the only discount is pay three years in one go and avoid the fee increases each year.
Is this for a follow up to the piece on the daily mail today? I'm guessing so.
Discounts of up to 25%? Have never heard of that. 3-5% is more common. I checked this once when I was trying to strong-arm our out-dated bursar. The best you can get is to pay all years at the current rate which ends up saving you the difference between the generally above-inflation annual increases versus a higher-rate savings account. It's still not substantial enough to make a huge difference.
How on earth do you know the school will suit your child so far on advance?
You need to talk to the school your DC goes to (or as just secured a place at). The schemes vary between schools: you'll probably save some money. Check T&C carefully - especially exit clauses.
It's often a pretty efficient way for eg grandparents to contribute to education.
I have asked the bursar about exiting a scheme. He said you can have your money back at any point, just without any interest of course. If you leave without notice, they with old a term of fees, but that seems normal and fair. Didn't ask what would happen if it went bust.....seems unlikely in this case as big school. So in this case, not so worried about issues to do with losing the money.
As I say, not looking for now....but if I was, I'd be comparing the stingy interest rates available on the high street(esp after tax) to the likely fee increases which certainly exceed the interest rates.
I know fee increases have been around 5% in last few years. These seem historically low, as often private schools I creased by around 8 to 10% in the years before the crash. Fine if your salaries keep pace....not sure ours will/would. I suspect overall the gains are fairly minimal. But not sure.
Is it better to have one of these compound interest schems or one which protects against fee increases?
Will have a look at newspaper article. Haven't seen it.
We have done this.
There is no protection against fee increases. We just get a small % decrease. Its only of use if you have the cash just sitting in the bank or if grandparents are paying.
We get a 1.5% discount paying annually in advance which suits us as we don't lose interest taking money out of savings accounts termly.
Another Telegraph article from this week: might be helpful!
Failing that, go and contact one of the specialist school fees independent financial advice firms. They can come up with some surprising thoughts.
Thanks for all your help. The schemes mentioned do not seem to be very generous.
One scheme A neighbour if mine is involved in (and it is a school I would consider in future years) allows people to pay 3 years in advance at the current rate of fees, avoidi g increases for that 3 year period. So if you had over £50k sitting around, you could avoid the increases.
Am I right in Thinking, if fees increased at say 5% every year and were at £18k to begin with, there would be a saving of £900 in the first year, more than £1800 in second and more than £2700 in the third (not working out the effect of the previous increase feeding into the next one). So the saving would be around £5,500 in that period. Sounds much more generous than the schemes people on here have mentioned.
I guess it depends on where your savings are to begin with. if if big paying investments, the money is probably better off left there, but if In Accounts paying about 2% before tax, then worth doing fees in advance.
Any thoughts about this illustration. I'm pretty sure I've got the terms correct.
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