A guide for homeowners aged 50+ balancing intergenerational support with personal financial security
For many affluent families, education is more than an expense. It is a statement of values, an investment in potential, opportunity, and advantage. Whether it’s supporting grandchildren through an independent school or helping adult children fund university costs for the next generation, paying for education is often part of the long-term financial picture.
Yet even for high-net-worth individuals, these contributions require careful consideration. Fee structures continue to rise sharply, and for those aged 50 and over, financial priorities are often shifting toward retirement income, estate protection, and asset preservation.
This article provides a strategic lens through which to evaluate how to fund education costs, not just whether you can, but also how to do so without compromising your own future financial flexibility or long-term objectives.
The Reality of Rising Education Costs
Independent school fees now regularly exceed £20,000–£25,000 per child, per year, with sixth forms and boarding arrangements reaching beyond £40,000 for most schools. University costs, while they can be subsidised through tuition loans, can still require significant support for living expenses, especially where accommodation is in London or other major cities.
For those supporting more than one grandchild or making recurring contributions over a 10–15 year period, the cumulative cost can run well into six figures. And yet, the visibility of this cost is often underestimated, particularly where it begins informally or out of generosity.
The question is not simply whether you can afford it now, but whether doing so complements, rather than conflicts with, your long-term goals.
Balancing Generosity with Sustainability
Supporting education is rarely a one-off act. It is a commitment, often repeated annually, and may coincide with other financial milestones, property downsizing, semi-retirement, or inheritance planning.
Before committing to any structured contribution, it is worth considering:
- Are the funds coming from income, capital, or borrowing?
- What impact will this have on your own liquidity or cash flow profile in retirement?
- Is the gifting structured to reduce IHT exposure, or could it inadvertently increase it?
- Have you assessed whether ongoing contributions might affect your ability to make gifts to other family members, or contribute to a pension or trust?
This is where structuring becomes critical. The right approach ensures that your support is efficient, sustainable, and aligned with your estate plans.
Smart Structuring: Funding Strategies to Consider
There are several avenues through which to provide support, each with distinct implications for tax, liquidity, and control.
a. Gifting from Surplus Income
If you can show that contributions are made regularly from surplus income and do not impact your standard of living, they may fall outside your estate for IHT purposes, immediately.
This is particularly useful for those with strong dividend income, rental yields, or pension drawdown that exceeds regular living requirements. However, proper record-keeping is essential.
b. Loan Structures
Rather than gifting outright, some families choose to structure education support as a loan to the parent or student, with informal repayment expectations. This allows you to retain flexibility while providing help, particularly if your financial situation changes later in retirement.
c. Trust-Based Support
Education is a common purpose for setting up a discretionary trust. These allow grandparents to provide for multiple beneficiaries, set limits on timing or usage, and mitigate IHT exposure, all while maintaining oversight through trustees.
Trusts can be particularly effective when paired with life assurance written into trust, or when funded through a planned series of gifts below the IHT threshold.
d. Property-Based Liquidity
For clients with low leverage and strong equity positions, unlocking capital via later-life lending, such as Retirement Interest-Only (RIO) mortgages or flexible term-based borrowing, can be a tax-efficient way to support education costs without liquidating investments or reducing pension access.
For those with wider property assets, in terms of rental properties, it can also be an opportunity to look at those properties to draw funds to assist in education-based fees.
At Henry Dannell, we frequently work with clients seeking to match borrowing to a fixed fee timeline (e.g., seven years of private school fees), ensuring capital remains available for other estate objectives.
Setting Thoughtful Boundaries and Preventing Unintended Financial Escalation
One of the most common pitfalls is overextension. What begins as one year of support can evolve into a full secondary education, university fees, postgraduate study, and beyond, often without a formal review.
We encourage clients to define clear boundaries:
- Establish how many years or terms you intend to fund.
- Agree on whether support is for tuition only, or includes living costs, travel, or accommodation.
- Set periodic review points to evaluate affordability, estate implications, or changing personal needs.
Clarity up front not only protects your financial well-being, but it also helps manage family expectations, a key consideration when multiple grandchildren or blended families are involved.
Preserving Retirement Readiness
Generosity toward the next generation mustn’t compromise your independence later in life.
Key areas to keep under review:
- Pension drawdown strategy: Are education costs impacting the sustainability of your income in retirement?
- Liquidity profile: Could a major gift limit your flexibility for future care costs, home adaptations, or lifestyle changes?
- Estate structuring: Have your Will, Letters of Wishes, and trusts been updated to reflect ongoing educational support?
A common concern we help address is the desire to support, without sacrificing optionality. The right structuring preserves your lifestyle while achieving your goals for the next generation.
Closing Thoughts
Paying for school or university fees can be one of the most meaningful financial decisions you make for your family, but it should not be made in isolation. The intersection between generosity and long-term security is where thoughtful planning becomes essential.
If you’re exploring ways to contribute toward education without compromising your retirement, our advisers would be pleased to help you review the options available.
Please note: tax treatment is based on individual circumstances and may be subject to change in the future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. Please also note: the Financial Conduct Authority does not regulate will writing, inheritance tax planning, and trust planning.
