Grandparents throughout Britain are more and more stepping in to cowl hovering personal faculty charges, however monetary specialists warn that older family could also be undermining their very own long-term safety.
Latest modifications imposing VAT on faculty charges have hit households arduous, with many turning to grandparents for an pressing monetary lifeline.
In January, colleges misplaced their long-held VAT exemption, leaving mother and father dealing with as much as 20 per cent greater payments if establishments move on the total price. The Treasury anticipates elevating a further £460 million by April this yr, growing to £1.7 billion yearly by 2029-30. In accordance with the federal government, the additional income shall be used to fund 6,500 extra state-school academics.
But this tax tweak has positioned extra pressure on households already grappling with a decades-long surge in personal faculty charges. The Unbiased Faculties Council (ISC) experiences that charges have climbed by a median of 5 per cent every year over three a long time. Figures for 2024 present common day faculty charges of £6,021 per time period (£18,063 a yr), up from £4,398 a time period (£13,194 a yr) in 2015. Boarding colleges now cost a median of £14,153 a time period (£42,459 a yr), in contrast with £10,123 (£30,369 a yr) eight years in the past.
A rising share of households are looking for monetary help from grandparents. A small survey by lender Premium Credit score discovered that 35 per cent of fogeys with kids in personal schooling obtained assist final yr; of those, 69 per cent relied on grandparents.
Amongst them is 46-year-old enterprise proprietor, Victoria Borman, who confronted taking up a 3rd job to pay her son Ryan’s personal faculty charges. As an alternative, her mom, Angela Gourd—fondly known as Supergran—stepped in. Gourd has coated roughly £7,800 for Ryan’s present tutorial yr at Bedford Faculty, due to a scholarship and bursary that considerably lowered the headline payment of £16,684. She has additionally paid £3,800 for a college rugby tour to South Africa, plus £600 on uniform and coaching gear.
“Mum simply said, ‘I’ve left Ryan money in my will anyway, and there’s no point in it just sitting there,’” explains Borman. “He’s exceptionally happy, she loves seeing him flourish, and I’m spared having to work around the clock. It’s a win-win.”
The Chancellor, Rachel Reeves, introduced final autumn that pensions could be made topic to inheritance tax (IHT) from April 2027. This has prompted some grandparents to attract on their pension pots sooner than deliberate.
“Grandparents were originally leaving their pensions untouched as they were exempt from inheritance tax, but now they’re considering spending the money in their lifetimes,” says Kirsty Stone of monetary recommendation agency The Non-public Workplace. “Families want to make gifts sooner rather than later, and for many, school fees offer the perfect opportunity.”
Figures from the insurer SunLife counsel that one in 4 individuals over 50 has given substantial money items to family up to now 5 years, averaging £20,021. A separate survey by funding platform Moneyfarm discovered that one in six grandparents recurrently helps their grownup kids and grandchildren, handing out a median of £71,942 over a lifetime.
There are clear tax benefits to giving when you’re nonetheless alive. Underneath the seven-year rule, any cash gifted is exempt from inheritance tax for those who reside for seven years after making it. The annual present allowance of £3,000 is freed from IHT, and you may as well give limitless particular person items of as much as £250 to completely different individuals every year with out affecting this allowance. Mother and father might give £5,000 and grandparents £2,500 in tax-free wedding ceremony items on prime of the annual exemption.
Specialists warn that generosity mustn’t come on the expense of a financially safe later life. “Grandparents shouldn’t jeopardise their own retirement by stepping in to pay school fees,” says Gianpaolo Mantini from wealth supervisor Saltus. “No matter how well-intentioned, it’s essential to plan for future expenses and healthcare needs before making large gifts.”
Nonetheless, with personal schooling prices steadily climbing—and the federal government’s new tax on charges pushing them even greater—households are more likely to proceed trying to the ‘bank of gran and grandad’ to maintain kids of their chosen colleges. Whether or not this monetary lifeline shall be sufficient to safe the following era’s schooling with out leaving older benefactors susceptible is a dilemma extra households are actually grappling with.
