Private School Fees To Rocket
Published / Last Updated on 25/04/2019
Today, the Independent Schools Council (ISC) published its 2019 census covering all matters related to private schools including funding, resources, reduced financial strain on the public purse with over 500,000 students not in the state education system but also facing criticism for a widening gap between state schools and private schools as well as political manoeuvring.
Various national newspapers focussed on lines from the report. The biggest area for us, as financial planners, is the cost of private education not just today but forecasting increased costs in the future for clients that need to plan and choose to fund private education for their children and grandchildren.
Apart from inflation, there is one area that could dramatically increase fees and another, politically motivated we fear, that could fees even further.
Pension Funding
To attract quality teachers, many independent schools contribute to the Teachers Pensions Scheme to ensure their teacher employees accrue the same retirement benefit as their colleagues in state schools. If you were a newly qualified teacher (NQT) would you be tempted to work in state education with a defined benefit pension scheme (employer funding at 16.48% of salary) or an independent schools that just offers a simple workplace pension with an employer contribution of 3%? It understandable why many private schools offer the same defined benefits Teachers Pension Scheme.
The problem is that the Department of Education has announced a pension scheme employer contribution increase for the TPS from 16.48% to 23.6%. That’s an increase in schools’ biggest cost i.e. payroll (salary, pensions and benefits) of over 6%. No doubt these costs will be passed on to school fees.
This year, the average school fees were £11,565 per term (£34,695 pa) for a border and £4,763 per term (£14,289 pa) for non-boarding Day schools. That was an increase for the past year of 3.1% for boarding fees and 3.8% day only fees.
If a simple 4% increase is applied for 2019/2020, based upon pension funding increases, fees could rocket to an average of £36,083 pa for a border and £14,860 pa for non-boarding Day schools. In London this could be even higher, currently £13,331 per term (£39,993 pa) for a border and £5,787 per term (£17,361 pa) for day only schools, with a 4% increase to £41,593 pa for a border and £18,055 pa for day only schools.
Political Fears for Further Rises
Independent schools have long argued for Charitable status give their function reduces the burden on the taxpayer by having over 500,000 pupils not in the state system and also creating thousands of jobs. That said, it has been rumoured that Labour plan, if in government, to add VAT to private school fees. Many argue that widening education gap between state and public school educated children, gives public school children a massive advantage career wise. A 20% VAT addition to fees would be a massive hike for any parent or grandparent.