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High return investment 'needed' to save for school fees

18 August 2009 / by Andy Davies

School fees for private education are rising three times faster than inflation, BlackRock has revealed, suggesting that higher return investments than cash savings accounts may be needed to keep up.

The Independent Schools Council Census 2009 has found that the average cost for private education per term now stands at just over £4,000, an 87 per cent increase since 1999 when the average cost per term stood at £2,149.

In comparison, inflation increased in the same period by 29 per cent, an average of 2.6 per cent per annum.

Commenting on this news, Tony Stenning, managing director of UK Retail at BlackRock, said: "Clearly, simply saving into a deposit account paying an average 0.15 per cent will see outgoings, such as school fees, significantly outstripping the return from savings."

Mr Stenning believes parents need to be making investments that provide a higher rate of return if they want their child to have a private education.

He said: "A higher return of investment is needed. The stock market is the obvious choice having risen by an average of 8.6 per cent over the 20 years from 1989 to the end of 2008.  But there is the potential risk of a significant market fall as happened in 2008 when the FTSE 100 fell by 28.33 per cent."

But, Mr Stenning believes there is an investment solution that can generate a good rate of return, whilst limiting the risk involved.

He added: "One answer is to invest money in a well managed absolute return fund - these can provide exposure to the stock market but have also shown that they can protect the investment when stock markets fall, therefore making them an ideal home for this type of saving."  

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