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School fees plans

Posted on 20 June 2013

School fees plans are designed to help parents and guardians pay school fees. They often come with some measure of protection for your investment (referred to as ‘structured plans’) and can be tailored to your individual circumstances and needs.

How school fees plans work

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School fee plans can be attractive investments – but you should always talk to a financial adviser before you commit.

School fees plans are a way to save that is usually promoted as tax-efficient, and usually offers some kind of protection. While they’re intended to provide for school and university fees, the money can be used for other things if you choose.

There are three main options.

  • Capital schemes. You invest a lump sum in a guaranteed fund, which usually guarantees that you’ll at least get your original investment back. Not all plans have a guarantee. The earlier you invest (when your baby is born, or even before, is best), the more chance you have of making money on the investment.
  • Income or regular savings schemes. You make regular monthly or annual payments to a savings scheme. Again, the earlier you start saving the more money your investment could earn.
  • Combined schemes. You invest a lump sum at the start of the plan and top it up with regular or irregular payments over a short term.

Things to consider before choosing your school fees plan

Are you happy with the risks?

Like all investments, with school fees plans there’s no absolute guarantee of how much you’ll get. The value of your investment can go down as well as up and you may get back less than you invested. It might not be enough to cover the fees when the time comes to actually pay them.

Make sure you’re comfortable with the risks before you invest.

 

How much tax will you pay?

School fees plans are designed to be tax efficient, but it may not always be the case, especially if you cash in a plan early. How much tax you may need to pay will depend on the type of plan you choose and your circumstances.

 

Before buying your plan, talk to the provider and make sure you understand what tax you may have to pay

 

Will you have to pay charges?

You might have to pay initial fees, annual management charges or even a percentage of the profits, depending on the school fees plan you choose.

 

Check with the provider what the fees and charges are before you buy their plan

 

Are you protected if something goes wrong?

If you use financial companies that are regulated by the Financial Conduct Authority (FCA), there are ways to complain or seek compensation if you have a problem with the plan or how it was sold.

Not all school fees plans are regulated by the FCA. Investing in an unregulated scheme can be very risky. You can check if a company is regulated by searching the FCA Register

 

Are there better investment options?

A school fees plan isn’t the only option, and it might not be the best one. There is a wide range of different savings and investment products available, which could be suitable for school fees planning, depending on your circumstances. Before making a decision, investigate the other products on the market to see if they’re better suited to your needs.

 

Have you got the right advice?

Unless you fully understand school fees plans and all the other options open to you, it’s best to get financial advice. An adviser might be able to find you a more cost effective investment.

Do you need a financial adviser?

 

How to buy

You can buy a school fees plan directly from a specialist school fees company or through an independent financial adviser.