If you’re paying for private school how are you doing it?

[thesadmaggot]

We have some options:
1 sell down our investments
2 remortgage/use low interest debt
3 reduce pension contributions and pay out of income

i’m trying to decide on which would be most efficient. option 3 increases our income tax bill quite significantly so I think likely to be the worst.

so I wondered if you’re in this situation what would you do?

Honestly I don't think you have enough.

Okay thanks for the reply, could you expand on your answer for me?

I think you could probably do it, but it would be a stretch.

We privately educate our 3, but I can honestly say it doesn't make one difference to our lives financially.

I think you probably could do it, but would impact on your quality of life.

But if you really want to, and are prepared to make cut backs, then it's a great thing to do.

Honestly I sometimes think I’m in a different dimension to some of the other private school parents on here. OP you are in a great position, with your pensions nicely stocked and 100k in savings/investments. I’d love to have a pot that size to raid for the termly fees.

We pay out of income, but make sacrifices elsewhere: our holiday budget is a third of yours, for example. Would cutting down on holidays be doable/worth it, for you?

Sounds like you could safely reduce the £90k pa pension contributions (acknowledging the tax hit) . To answer your question, we have well stacked pensions, built up very aggressively for 20 years, and now we pay fees but don’t save any more into pension

I know you’re putting more in your pension due to the 100k cliff edge but what is your household income OP?

We spoke to our financial advisor so I would recommend that.

With the further info on your pensions I think I’d reduce pension contributions. What age are the children? If age 4 I’d be returning full time I think. If year 7 and you’ve only got 7 years I think that’s a bit different. Do you have any plans for early retirement?

Being very honest we use grandparents to pay fees as gifts out of excess income. As feed are rising the children are very lucky to have been the recipient of some money from their other grandparents discretionary trust so they will pay a bit of their own fees. We will top up from our income.

We pay out of income. I don't think any of your options are particularly sensible. Is this for secondary only or for all the way through school. c£250k out of taxed income per child (about £400k gross income per child from reception to the end of sixth form) doesn't sound like something you can afford. Your pensions aren't particularly high at £40k per annum each.

If you're going to do it though then the best thing to do is to make up the shortfall from your investments.

@thesadmaggot

I think you could do it. Don't be put off, it's definitely worth the stretch. Just needs a bit of working out.

We pay ours from passive income that is outside our earnings. We have no mortgage and an investment portfolio in place.

I would do the following in your shoes:

Have you thought about applying for a scholarship? I suspect a bursary might be unrealistic but a scholarship could bring your fees down. Is your child sporty or academic?

What are you doing with your £100k? Is it in a savings pot or ISA? I would be thinking about getting it into an Investment ISA and building a dividend portfolio from that. It could cut another chunk off the fees and would be totally tax free.

How long do you have before your child goes to school? I would absolutely prioritize secondary for private and possibly look at sixth form elsewhere so you've only got 5 years of fees to manage. That will make it easier to manage if you up your hours at work or need to make sacrifices. It goes very fast!

Thanks, yes savings in a stocks and shares ISA and invested, we’ve done well but I need a cash float in case of dips. I prefer index funds over dividends stocks for reduced risk. Just personal choice.

2 years until the start of year 7 with academic and music scholarship an option but obvious best to plan without that.

How much will the fees per year/term be?

Absolutely personal choice on your risk appetite. I would never normally suggest taking money out of a tax wrapper but it might be worth thinking about Premium bonds. With a large investment you're likely to win a little bit every month if you set them up smartly and you have access to the money when needed. Just an idea, good to look at things from all angles but might not be for you.

Also wise to not rely on a scholarship, plan for the worst and hope for the best.

Well you’re maybe ok but if you’re wondering how to pay the fees then you obviously have concerns yourself
why make life difficult and compromise investments and pensions and get into debt - plenty of decent state schools.

The point is I could do it either of those ways or in combination. It’s which one is most efficient financially. As a thought experiment (and take the Mumsnet drama about what it might be spent on out of the question) - imagine I can free up £20k per year by either:

1. reducing our pension contributions. We have enough in there already for a perfectly reasonable retirement and we’re 20/25 years off retirement age so it’ll grow anyway. The downside is we lose the tax relief advantage which is substantial
2. i could go full time. I work 50% pro rota at the moment and have for the last 10 years. This is last resort but easily arranged.
3. we could sell down our ISA investments - we’d earmarked this for fees. If I don’t use it for this then what else will I use it for? House, cars etc all fine. We’re early 40s and not planning to retire early. Instead we’re planning to continue to grow our careers
4. just release it out of equity in the house. The mortgage is small and more than manageable anyway.
5. any combination of the above

@Besidemyselfwithworry

if you’re wondering how to pay the fees then you obviously have concerns yourself

No I don’t have concerns.

It’s called financial planning.

I suggest you try it too. Although best not to discuss your ideas on MN if it involves school fees 🤣

what virtuous alternative should I have said I was going to spend the money on?

Could you do a combination of a couple do things?

Reduce your holiday budget and reduce pension contributions?

I’d leave the investments for now and definitely wouldn’t go full time.

Yes definitely could combine strategies or change year to year.

if I don’t use the ISA what else would I use it for though?

Thank you. I’ve never done premium bonds but will definitely think about it with the annoying 12k cash isa limit coming in :(

Can you not do a bit of all 3???

just to say I put this is money matters and not anywhere else because it is about financial planning and I wondered how others where structuring their finances whilst I thought about how I wanted to arrange my own.

If your investments are tax free I would leave them there. Does the school offer a discount if you prepay a lump sum? Ours do a 4% discount. If so I would have a look at mortgage rates and remortgage if less than the school discount. Then slightly reduce pension contributions to pay the mortgage. It is worth it. My DS is thriving since we went private.

Thanks, the prepay discount is only 2% but I hadn’t even thought of that!

She isn't wondering where to get the money from, she is wondering which of her pots of money she should use.

Thank you. It feels so galling to pay horrific rates of tax but it’s definitely an option to take the hit and take it out. we have private medical through salary sacrifice and don’t want to SS for a new car, ours are fine and it would cost us more overall.

We could ski every other year but DH wouldn’t approve 🤣

in seriousness we could reduce the holiday budget and still have a really good time travelling I’m sure

The best option is the one that costs you the least amount of money. But you haven't given any information about what each if the 3 options Costs.

If you work that out you won't need help from mumsnet. If you don't know what each of the 3 options costs, then you need a financial advisor, not Mumsnet.