Further Uses of Life Assurance - School fees

Despite the rapid developments in state education, a substantial number of parents still prefer to send their children to private schools at considerable financial cost. If you intend sending your son or daughter to a fee-paying school, you should consider buying life assurance to finance the payment of fees, and you can also ensure that should you die while your child is receiving full-time education, your insurer will continue the payment.

A popular method of doing this is to take an endowment policy, where the sum assured is paid not in one lump sum, but in instalments over an agreed period while the child is at school. Since the 2008 Finance Act such policies only qualify for income tax relief if premiums are payable for at least ten years, so you would need to take out this type of policy almost as soon as your child is born. Even if you delay until your child is only two years old, you will have to wait for benefits until your child is twelve; otherwise you forego the various tax advantages and may be liable for tax on the policy proceeds. In any case, the sooner you start the smaller the premium will be.

With short-term endowment policies, you may find that the premium exceeds the maximum rate of 7 % of the sum assured permitted by the Inland Revenue for tax relief. To overcome this, add family income benefit to your policy. The sum assured is then increased considerably for a very small additional premium, and the tax relief obtainable on the full premium more than offsets the extra cost involved. As an extra benefit, a regular fixed income would be paid from your date of death to the end of the term of the policy, quite apart from the school fees already covered by the endowment assurance.

Another possibility is taking out a loan on your policy. You can usually borrow against the policy surrender value, but the disadvantage of this method is that you may have to repay interest at a gross rate (under current legislation the first 69 of interest in any year does not qualify for income-tax relief).

Some insurers advise you to take out a whole life or endowment policy and then surrender part of it each year to provide the school fees as you require them. But with this method, unless you are careful, you are in danger of losing income-tax relief and of creating a tax liability on the policy proceeds. So check with your insurer that this is not liable to happen before you take out a policy of this type.

Where you are paying school fees yourself out of your own income, yoy do not need any of the policies so far described. All you require is a family income policy, so that in the event of your death the' fees to complete your child's education will be paid by your insurer. This policy is very cheap, since no benefit is paid if you survive to the end of the policy term.


School fees

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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read on: Further Uses of Life Assurance - Example

Despite the rapid developments in state education, a substantial number of parents still prefer to send their children to private schools at considerable financial cost. If you intend sending your son or daughter to a fee-paying school, you should consider buying life assurance to finance the payment of fees, and you can also ensure that should you die while your child is receiving full-time education, your insurer will continue the payment.

A popular method of doing this is to take an endowment policy, where the sum assured is paid not in one lump sum, but in instalments over an agreed period... see: Further Uses of Life Assurance - Example