Private school fees: the pros and cons
There's no doubt that those who attended private school are over-represented in the upper echelons of society.
You could be forgiven for thinking that this is not a question of cause and effect but two symptoms of the same thing: rich and influential people send their children to private school, and the children of these rich and influential people rise to positions of power – the school is irrelevant.
However, a recent study has shown that this isn't the case. It claims that there's something about private school itself that makes people more successful. It begs the question whether we should all be saving to send our children to private school, to secure their financial future.
The Social Mobility and Child Poverty Commission recently revealed the extent to which private school children go on to dominate public life. Around 7% of the UK population goes to private school, and yet 36% of the current cabinet and 22% of the shadow cabinet is the product of private school.
Meanwhile, 71% of senior judges went through the independent sector, as did 50% of those in the House of Lords and 43% of newspaper columnists.
They don't just rise to power, they also rule the commercial world. Some 44% of those in the Sunday Times Rich List also went to private school, while an ACAS study at the end of last year found that 40% of chief executives did.
A recent Social Market Foundation (SMF) study identified the impact of this dominance on earnings. It found that between the ages of 26 and 42, someone who attended an independent secondary school would earn an average of £193,700 more than someone who went through the state system.
Nida Broughton, chief economist on the project, says: "This isn't that surprising given that many have a privileged family background, and are already outperforming at the age of 11 because they went to prep school."
However, she then went on to adjust the figures to remove the influence of these factors and found that the wage differential wasn't purely down to the background of private school children. Even when they started from exactly the same place, there was still a wage premium of £57,653 from attending private school.
The SMF said a great deal of this was due to academic achievement: those who went to private school achieved better A-level results, and were more likely to go to university. Barnaby Lenon, chairman of the Independent Schools Council, attributes this to better teaching, claiming: "Independent schools are strong at teaching the traditional hard subjects that universities want, including science and maths as well as modern foreign languages."
Independent schools also emphasise the high-quality pastoral care and a rich extra-curricular life offered by their schools, which help prepare children for success.
Lucy Elphinstone is the head teacher of Francis Holland School, a private girls day school in Sloane Square, London. She says: "We foster an atmosphere of competition, building resilience, independence and character. We also give pupils the opportunity to develop leadership skills."
These schools also attribute much of their success to their independence. Neil Roskilly, chief executive of the Independent Schools Association, says it means there are schools to suit everyone.
Elphinstone says this enables the schools to establish a strong ethos, and set the curriculum and the co-curriculum to prepare the children effectively, rather than being bound by external criteria. Her focus, for example, includes preparing the girls for jobs in an increasingly digital economy.
However, there is a potential downside to independence. There are 2,400 independent schools in the UK, and they are far from equal.
Around half of independent schools are part of the Independent Schools Association, and are inspected by the Independent Schools Inspectorate; the other half are inspected by Ofsted.
Ofsted inspected 248 schools in the independent sector between September 2013 and June 2014. It said that 32 were outstanding (13%), 146 were good (59%), 43 were adequate (17%), and 27 were inadequate (11%). Meanwhile, 70 were judged to not be providing a good education for pupils (28%). It clearly demonstrates how averages do not tell the whole story and how some independent schools are clearly failing their pupils.
In some cases, the failings are extreme. In October 2014, New Gables, an independent school in the Aire Valley, West Yorkshire, for children with behavioural difficulties, was closed after a highly critical Ofsted report. At the time, the £31,000-a-year school suffered from a 'systemic failure' of policies and a chronic shortage of resources, which meant that the school had no text books.
Of course by contrast, many schools receive glowing inspection reports. But even with the best education, some children will not be a financial success. The Higher Education Funding Council for England found in July last year that 23% of those who went to private school
and gained a degree were still unemployed six months after graduation, and that 40% of them failed to secure a graduate-level job or further education.
This is lower than the 28% of unemployed state school graduates and the 53% who aren't in graduate-level jobs but is bound to come as more of a disappointment to those parents who have spent so much on their children's education.
It also begs the question of whether a private school education will have prepared young adults for the junior, non-graduate roles they may find themselves in.
While all private schools have some pupils who receive bursaries, and many have programmes to encourage pupils to volunteer within their local community, it's not the same as going to school with a true cross-section of society. Being faced with all the diversity of life, and being treated as inferior by them, could be a culture shock for children fresh out of private school.
Once graduates find a career they love, even then there is no guarantee that it will be incredibly financially rewarding. The private schools agree that putting children into a position to make money is not the only job of a school, and that giving them the tools they need to lead happy and fulfilled lives is a more appropriate aim.
However, if happiness is our measure of success, it means that no amount of research on earnings differentials will prove that private schools are better than the state system. While those representing private schools emphasise the many advantages of the system that helps foster a positive environment, they don't have a monopoly on this.
The Office for National Statistics found in April last year that 82% of children were happy at school, which is a lot of satisfied state school children.
One in three private school pupils has some help with fees.
Schools offer a limited number of full scholarships for those who show excellence in academic achievement, sport or music. There are also a number of awards of up to 50% of fees.
Lenon adds that schools are increasingly looking at ways to help parents who cannot afford fees, through bursaries. He says: "They are increasingly moving away from the traditional merit-based scholarships. This year there are more than 5,000 pupils who pay no fees at all and over 41% of pupils on means-tested bursaries had half their fees remitted." Those who receive this help may, however, have to demonstrate high grades throughout their school career.
For those who struggle with fees but fail to qualify for this help, in most instances there remains room for negotiation. Schools are feeling the pinch as much as everyone else, and if there are spaces to fill and you have money to spend, you may be able to agree lower fees.
A study by wealth management firm Killik & Co in July 2014 found that a private education now costs £271,000, while boarding school costs £435,000. It said that overall fees have increased by more than 300% since 1990, while wages have risen by just 76%.
Patrick Connolly, a certified financial planner with Chase De Vere, emphasises that affording private school should start with understanding how much money you need and saving towards this goal as early as possible.
Connolly advises: "Ask yourself how much you can save, and for how long, then decide on the best investments to meet your target. There is no one investment strategy or product that does the job for everyone; it depends on each family's circumstances."
He suggests that those who are saving over a short period or want to avoid investment risk should stick with cash savings and consider using tax-free cash Isa wrappers.
For everybody else, he says: "The best approach is likely to be either a diversified global equity fund, such as Threadneedle Global Select or the Witan Investment Trust, or a combination of different assets including equities, fixed interest and property, which can be achieved through a range of underlying funds or a multi-asset fund such as Schroder Multi-Manager Diversity."
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).