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School Fees Planning ....

Derek Battham is a businessman who has achieved considerable success at a comparatively early age. After leaving school, he developed an interest in business applications for computers. In collaboration with some friends, he started writing bespoke software, which he sold to some of his father's business contacts. Soon he had a reputation, which he had the business sense to capitalise on and set up his own company with his old school friends as fellow directors.

He is now married and has two sons, aged 2 and 4. When discussing the future with his wife, Norma, the subject of schooling for the boys has been of paramount importance. Norma attended a fee-paying school and has convinced Derek that they should make plans to educate both the boys at a good public school.

Their family house is valued at £275,000 and they have an outstanding mortgage of £75,000. Derek draws a salary of £35,000 pa and benefits from dividends, which have averaged £10,000.

Over the years Derek has built up a small portfolio of investments:

Deposit Account	£10,000
Unit Trusts	£15,750 (3 different companies)
National Savings Certificates Index linked	£10,000

Derek and Norma's main concern is how they will pay the school fees and how best to utilise their current income and assets. Derek is also concerned about the effect that the changes announced in recent budgets might have on his plans.

Norma and Derek need to review the major issues to consider when establishing the likely cost of the boys' education. What do you think they are? Once they have estimated the cost of the education, they then need to pay for it. What type of investments do you think could be suitable for the provision of school fees and university education? What do you think are the likely advantages/drawbacks of each selected investment?

Questions which Derek & Norma will need to make a decision on:

	When would they like private education to start - at preparatory level or from age 11?
	What basis do they intend to have the boys attend school i.e. day pupils or boarders?
	Which schools have they chosen and do they have a copy of the fees structure?
	Does the chosen school offer any assistance with fees through scholarships?
	Will the chosen school involve any additional expense for sport or music or other activities?
	Is it the intention that the boys will go on to university?

Action Planning:

Derek is not using his or Norma's ISA allowances and should consider taking advantage for this tax year.

ISAs have been given a 'political' guarantee of a life span of at least 10 years.

The National Savings Indexed Certificates will ensure that part of his portfolio has a hedge against inflation. It may be wise for Norma to consider making a similar investment. Care needs to be exercised to ensure that they are always allowed to run for the full 5 years.

Information about Norma's employment is not available but if she is a non-taxpayer they could ensure that her personal allowance is utilised by putting some investments in her name.

If either set of grandparents are willing to help they could consider using a Covenant to transfer money to the children.

Derek may wish to consider protection to ensure that his plans are fulfilled whether if he dies or has an accident or illness before the boys' education is complete.

The protection element if he were to die before all the fees were paid could be paid for by a decreasing term assurance policy (probably Family Income Benefit Policy).

Also on the theme of protection, a Permanent Heath Insurance Policy may also be appropriate if Derek loses his ability to generate an income due to an accident or illness.

Additionally, life assurance may be considered as a means of investment, perhaps with a number of endowment assurance policies each capable of being cashed in a one year intervals, with a view to providing the level of income required.

The drawback is that life assurance funds are taxed within the fund which does affect their growth in comparison to say unit trusts and ISAs but life assurance does provide additional life assurance protection from day 1.

The above is intended to give an idea of the possible investments/protection which may be appropriate.

The eventual choice will depend on the individual's attitude to risk, timescale for investment, amount required and funds available (currently and estimated for the future), hence the reason why independent financial advice should be sought.

REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.