Has anyone with children in Independant School discussed the option of paying school fees ahead?

[Cornflakemum]

I know in the current financial climate this might sound a bit , but given how low savings/investment rates are, I wondered if anyone ahs explored this as an option?

I saw an article about it recently which suggested that it might be in both parents and schools best interests to do this, if you are fairly certain that your children will remain at the school?

Will they not think you are money laundering?

but we're not at 0% interest yet

One friend did this a few years back but the school no longer offer it so he younger DC are paid for normally.

My DD's school doesn't offer it, or if it does it is not documented.

My DS' school has offered the possibility, but actually it has just made me concerned for their cash flow/viability.

Yes - we have considered it.

It is tempting if you have a lump sum earning no interest to pay ahead. However, we decided against because we are worried about school going bankrupt which a surprising number are (see my thread in Primary School section of yesterday).

In addition you have to wonder whether school fees might actually fall in a deflation environemnt and you would be locking in the fees at a higher level if you paid ahead.

Finally, what happens if you suddenly need the money for something else - such as a surprise redundancy?

In the end it may be better paying down some of your mortgage if you have one.

not something we can conside as do not have cash just lying about....

but abetadad - if the school does offer it, pretty sure legally they have to ringfence it - ie it would still legally be yours if the school folded and couldn't be used to pay off creditors?

We have two years worth of fees in an ISA which is performing poorly but nowhere on the school literature is this mentioned as an option.

Would it be worth writing to the bursar and asking do you think?

Only good if you get some kind of discount and if the money would just be lying in a crappy account getting bugger all interest.

Could be.

From what I gather from the family I know that did it, they paid 5 years of fees at the current rate.

As our fees have gone up way more in 5 years than any of our investments have performed, it would have been a sensible option.

we looked at it, but instead of offering a small discont for doing so (we're talking at least 3 years upfront, full boarding, at secondary level) the school actually factored in fee rises

so we thought, bugger it, we might as well have the interest instead of the school

No I do not think they ring fence the fees if you pay ahead. Some may do but I know that in the past people lost advanced fee money when schools went bust.

You are just an ordinary creditor along with all the other creditors and the banks at the head of the queue.

Given that interest is piddling at the moment - AND you will pay 40% tax on it, might as well do this if the school offers it.

I would think that paying ahead is not good if you think the school is at all fragile financially.

They do factor in the fee rises and they may adjust the payment each term. You might have to pay more if they have a bigger fee rise than thought.
However, now bear with me, it is calculated by looking at the present value of future money. ie. the discount you get is based on the interest you would receive if you invested that money now for the period until it is due.
So currently you are looking at very low interest rates so your discount would not be as big as if you did it a couple of years ago.

It is covered as an option in the contract we have with DD's school, called a 'Composition Scheme' Prepayment of 2-5 years' fees on separate contract. Contract provides for refund of unused part if pupil leaves earlier than expected but fees in lieu of notice and other sums due will be deducted before refund.

Also I think it was in the contract for another local school she went for. You didn't have to use it to pay full fees each year so say if you inherited some money now, you could prepay the amount to the school then use it for 50% of the fees each year, reducing the burden on your income.