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Meet the soaring cost of university fees
If you are a parent with children approaching university age, you’ll probably be well aware of the rising cost of university fees.
In 2012, fees are due to rise from their present maximum of £3,290 to a daunting £9,000 a year, so many families will be facing tough choices. Here at Census, enquiries about university cost planning has increased dramatically since the fees rise was first mooted last year, and a number of our clients who thought they had set aside enough are having to reassess their finances.
Estimates vary as to what parents will have to set aside, with some plans requiring around £200 per month over 18 years to cover future university costs and living fees, and others based on £300 a month to achieve appropriate cover. Fortunately, there are a number of options available to address this situation.
MIP: maximum investment plans are 10-year endowment plans that require you to invest regularly for at least seven and a half years. They are particularly attractive to higher rate tax payers, as basic rate tax is automatically deducted from income and gains made within the fund, but there is no further tax on maturity. Te minimum investment varies from just £50 a month with Skandia, tp £500 a month with HSBC. But check the small print, as some policies take hefty charges in the first year or two, leaving very little equity if you cash in early.
Junior Isas: these are due to be launched in November and will allow parents to save up to £3,000 a year into cash or investment funds. The returns will be free of capital gains and income tax, and the money can be accessed once the child reaches 18. We calculate that if the full £3,000 a year is invested, a total of £107,900 will be accumulated by the time a child reached 18, based on 5% growth a year. This will be more than enough to cover a three-year course at £9,000 a year, with living costs of £10,600 a year - total of £73,365 when adjusted for inflation.
Friendly Societies: tax free savings plans on top of your Isa allowance are available through Friendly Societies. The maximum contribution is only £25 a month. Assuming 6% annual returns, this would yield £9,570 over 18 years.
Chartered Financial Planner