Sep/11 – Tuition fees
It is becoming clear that the standard rate will be £9000 pa. Initially it was thought that this level of fees would only apply for the “elite” universities.
These fees will be funded by student loans and recovered through taxes once a graduate’s income reaches a minimum threshold. Initial indications are that the threshold will be around £21,000 pa and that the rate will be at 9% pa on earnings above this threshold.
Interest will also accrue on the outstanding loan.
This is a massive commitment that students and their families need to consider very carefully before making decisions on their future.
It may be too late for students going to university in the next few years to save enough to make a difference but if you have a young family or even if you do not yet have children there are ways to start planning now to ease the burden.
The maximum ISA allowance for this tax year is £10,680 and this will increase annually. This is a very good way to fund for student fees. Investments can be made monthly which instills a discipline to save and there is the benefit of pound cost averaging where regular savings reduces volatility. This is important in times of market volatility. Currently the rules allow ISA savings from age 16 so when your child reaches that age they should be encouraged to start saving in their own right.
Tax-exempt Friendly Society Saving Plans are another alternative. They are essentially long-term endowment policies. Paying no or little tax creates opportunities for higher returns through these vehicles, assuming of course the funds you pick are profitable. However, the amount you can invest in these products is limited.
I have several clients who use child benefit in whole or at least a part of it to fund for potential fees. This benefit is available from birth so it allows a term of around 18 years to save.
Even if your child decides not to pursue further education you will have built up a fund that can be used to help set up a business, provide a first car, a deposit for a property or pay for a wedding.
It is never a bad idea to start planning for your children’s future. If you would like to discuss this further get in touch.
If you would like to arrange a meeting with one of our Advisers to discuss how we can help you please contact us.