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?

The plan was to pay out of income. However, we wouldn’t have done it unless we had savings enough to cover a good chunk just in case. We worked out that we had enough in savings to cover at least 5 years (assuming a rather pessimistic 10% growth each year) without needing to touch ISAs or our relatively small amount of other investments.

Those savings are our early retirement fund, and we figured if we had to use them, we could work a couple more years and not go quite so early. (The intention is to use the saving to bridge the gap between retirement and being able to take the pension, so working a bit longer would not only replenish the fund, but also reduce the amount of time needing to be covered).

DP was made redundant shortly after accepting the school place. I think I should be just about OK to pay the fees out of my income alone if he can’t get another job, but I’m very glad we have that cushion as it takes the pressure off.

With this happening to us, I am not sure I would advise planning to pay out of income alone unless you have an alternative plan in case income suddenly drops significantly (in our case, it will have halved unless DP can get another job).

We pay out of income, we have enough in savings/investments to cover both DC schooling but would prefer to leave that alone to grow and the upfront discount is not sufficient to change that

We pay out of income and have savings put aside in case we lose our jobs to make sure their education isn't disrupted. I only have one though, the other two are in state as that worked for them.

In your case I'd reduce the pension payments as you already have a good amount in there.

We aren't paying it at the moment but could & were looking at it for one of our DC.

We would pay out of income. It would mean a bit less going into savings but we already overpay the most we can on mortgage & have a big chunk of rainy day money in ISAs so we would be fine.

We earn a lot - this year with bonuses it'll be about 400k all in between us.

We know a lot who have grandparents paying or heavily contributing. We also know quite a few earning less than us and paying who have openly said they are on very thin ice. A couple of friends have said recently that they regret starting at 3 in prep, as the costs are really escalating and its feeling lie too much.

I think option 2 is the nearest way to describe how we paid for it. We had an interest only mortgage which we made annual capital repayments off of through bonuses but for years had also been making additional monthly capital repayments out of income to get the mortgage paid off more quickly. We diverted those monthly capital repayments to school fees. Since DD left school two years ago we are back to making monthly repayments again. It has delayed us clearing our mortgage off by 3 years as we only went private for the last three years of secondary school. We'd have happily done it for the whole of secondary but the need to go private didn't became apparent until she had been at a state academy for two years. Best thing we ever did for her.

From my salary. Small investment it it goes tits up. Rather hoping it doesn’t go tits up! 4 years to go …..

Premium bonds are a crap investment. They're only worthwhile if you are using all of your £60k annual pension allowance and your 20K annual ISA allowance and you are both higher rate tax payers who have used your savings interest allowance. If all of these do not apply then you're likely to earn more in a high interest savings account.

Of course there is a very small chance that you could win big but you could do that with a lottery ticket.

Remember to also factor in 3/4 years of university following seven years of secondary school.

We're paying out of income. In your situation I'd reduce pension payments. If you end up with a big enough pension pot that you're paying higher rate tax in retirement, it will be more tax efficient to reduce pension payments rather than spend ISA investments. Personally I've seen excellent gains in my S&S ISAs recently and would not want to liquidate them any time soon, but obviously that depends on your appetite for risk and choice of investments.

I don't think a financial advisor is really needed for this kind of situation as it's fairly straightforward, we never use one. Chat GPT is pretty good for financial projections and modelling various scenarios.

i don’t think we’ll use a financial advisor but I’m going to model all 3 options on a spreadsheet.

we’ll definitely be HR tax payers in retirement but that’s 40% that’s a lots less than 60% plus student loan plus national insurance…

Jeez: if you’re that financially ok, pay out for a financial adviser, who can offer you comprehensive advice on this question - rather than asking a bunch of random amateurs on the internet.

Im not asking mumsnet for advice. I have asked what others have done. Out of curiosity because I enjoy the financial planning side and also because there might be interesting ideas I haven’t thought of.

I say Im financially okay because I’m not ungrateful for what I have.