Fees in Advance Scheme: A Guide for UK Independent Schools and Parents

With rising education costs and increased financial planning awareness, more families are exploring fees in advance schemes (FIAS) as a way to manage private school costs more efficiently. But while the idea sounds straightforward — pay upfront and save money — it’s worth understanding how these schemes actually work, what the financial benefits are, and whether they suit your circumstances.

What Is the Fees in Advance Scheme for Schools?

A fees in advance scheme allows parents or guardians to pay a lump sum to an independent school upfront, typically in return for a guaranteed place and a discounted fee rate over a number of years.

It’s most commonly used in private schools to:

• Lock in today’s tuition fees

• Save money by avoiding future fee increases

• Simplify financial planning over several years

Some schools refer to this as a “commutation scheme” or “advance payment scheme”, but the principle is the same.

How Do Fees in Advance Schemes Work?

Under a typical FIAS:     

1. The parent pays a lump sum to the school — this could cover 2, 5, or even 10 years of fees.

2. The school applies a discounted rate, often linked to a notional return on the sum paid.

3. Each term, the school “draws down” the relevant amount from the prepayment to cover fees.

4. If the pupil leaves early, the remaining balance (minus deductions) is usually refunded.

The discount is not always a simple percentage. Some schools offer a rate based on a notional interest rate or link it to inflation or investment return benchmarks.

Example:

Let’s say Year 7 fees are £18,000 per year and are expected to rise by 5% annually.

• A parent agrees to pay £90,000 upfront for five years.

• Instead of paying £18k, then £18.9k, then £19.8k, and so on (total over £100k), they fix the total now.

• The school benefits from early cash flow, and the parent saves £10,000+ in the long run.

Some schemes even involve the school investing the advance payment and using the return to fund the discount.

What Is the Impact of the Fees in Advance Scheme?

For families:

• It saves money over the long term, especially if school fees rise significantly each year.

• It offers financial predictability — useful for estate or cashflow planning.

• Some see it as a way to remove assets from their estate, though this must be approached cautiously for Inheritance Tax (IHT) reasons.

For schools:

• It provides upfront capital to invest or use for capital projects.

• It reduces fee collection risk and improves financial stability.

However, both parties are committing to a long-term relationship — so trust, stability, and clear terms are essential.

What Is the Future for Fees in Advance Schemes?

There’s growing scrutiny of advance fee schemes due to:

• Possible tax implications — particularly if families are hoping to reduce IHT exposure by prepaying

• Affordability — as only wealthier families can access the savings

• Political shifts — including potential VAT changes on private education, which could disrupt the value of fixed-fee deals

The schemes themselves are not under threat, but their financial planning value may reduce if the tax environment or educational policy changes. Some schools have become more cautious in offering them for long durations.

Are There Other Things to Consider?

Yes. Before committing to a FIAS, you should think about:

• Refund policies if your child leaves early

• What happens if the school closes or merges

• Legal structure: is your payment protected in a trust or escrow?

• Tax advice: especially around potential IHT planning (HMRC may view certain setups as deliberate deprivation of assets)

• Cash flow impact on your own finances

• Impact of future VAT or political changes affecting private schools

Always ask for a full written explanation from the school and, where necessary, seek independent legal or tax advice.

Final Thoughts

Fees in advance schemes offer real savings and certainty — but only for those with the liquidity and confidence to commit upfront. For the right family, they’re a smart planning tool. But as with any long-term financial decision, the small print matters.