School fees question

[Ffuchsia]

We are in a position where is makes sense to pay DS's school fees in a lump sum. He is due to start senior school in September.

I've contacted the school and been given a figure for the entire period of his attendance. But they state that this doesn't exempt us from potential future fee increases.

Is this normal?

They occasionally offer this option but sometimes only in the short term (i.e. protected from school fee increases for 2 years) and many schools don't now as the increases are not paid for by the relatively small cash injection at once. For instance, massive increases in costs from pensions and NI changes for teachers this year would mean that the school then loses out in the longer term.

No protection from fee increases.

But they give you an annual % decrease on fees for paying in a lump

They've offered a 4% discount on the fees if paid up front.

We'll keep the money invested and pay on an annual basis.

We paid on an annual basis. However, if you have to pay tax on the money you earn from the investment, your residual income will possibly not keep pace with the fee increases. Especially if the tax is at the highest rate. I would pay yearly though and take the discount. If you find the school is not what you think and you want to move, you have more flexibility by not paying 5 years plus up front. As inflation is currently 0%, school fees always go up way more than inflation!

We paid upfront on an annual basis before swapping to monthly standing order for 6th form - there was a small discount for paying the lump sum by a given date in August prior to the start of term. Only fee rise exemption would have been if it had occurred mid year which it never did.

No real advantage except it was easier to track all the extras ie lunches, books, excursions exam fees etc

Friends paid all their senior school fees and extras in advance at a well known boarding coed having been given quite a reduced figure by the bursar. They then sat back and looked smug. They were a bit shocked when bills starting rolling in in the L6th for extras "not budgeted for" and then at the end a significant part of the last terms fees even following deduction of a starting deposit! They negotiated it but still had to pay something.
Having said this they liked the fact that the whole bill was paid off and they could forget it.

As discussed widely on this forum, some school fees have risen by 5% per annum so from year 7 to year 13 you'd expect fees to have risen by 34%.

A 4% discount paying upfront doesn't help at all if you aren't protected from the fee increases.

I think you've made the right decision, but how to keep up with their inflation is the hard question.

The private schools my DCs went to wouldn't give us any discount at all when I asked to pay 5 years fees upfront. They said that with interest rates so low, they were also struggling to get any sort of return on their investments (just as we were!). Also I don't think any school would offer protection against future increases.

What about a school that had expansion or development plans and that needed to spend a large amount all in one go?

I'm not an expert here, but many schools would be reluctant (and possibly barred) from taking on big loans so upfront fee paying could be a good source of finance.

Any school bursars or FDs on the boards?

OP paying upfront basically means that the school get to invest the money rather than you. The rate of projected interest is the discount they give you but takes into account that your lump sum would be reduced each year or perhaps even by that period's school fees.
TBH even if it was a good percentage return I would n't take the risk until the DC was very settled at the senior school

meant 'perhaps even each term's school fees'

We paid up-front and over about 9 years our overall bill was several thousand less than it would otherwise have been. The increases were a built in formula and there were a couple of options. We did three slugs: one for the junior school, one for senior school and one for 6th form. We liked the fact that it reduced admin and was dealt with, ie, no making sure x thousand was in a particular current account once a term. Still had to pay termly expenses.

We have done similar for our daughter.

There have been no guarantees.

Main advantage of paying up front is that the money is then outside your estate for inheritance tax purposes. So if you get run over by a bus your nearest and dearest are not out of pocket!

We are debating this too, but I am not prepared to enter into it until DC is settled - so not until the end of the first year. I have seen too many "perfect" school choices not work out.