Grandparents across Britain are increasingly stepping in to cover soaring private school fees, but financial experts warn that older relatives may be undermining their own long-term security.
Recent changes imposing VAT on school fees have hit families hard, with many turning to grandparents for an urgent financial lifeline.
In January, schools lost their long-held VAT exemption, leaving parents facing up to 20 per cent higher bills if institutions pass on the full cost. The Treasury anticipates raising an additional £460 million by April this year, increasing to £1.7 billion annually by 2029-30. According to the government, the extra revenue will be used to fund 6,500 more state-school teachers.
Yet this tax tweak has placed more strain on families already grappling with a decades-long surge in private school fees. The Independent Schools Council (ISC) reports that fees have climbed by an average of 5 per cent each year over three decades. Figures for 2024 show average day school fees of £6,021 per term (£18,063 a year), up from £4,398 a term (£13,194 a year) in 2015. Boarding schools now charge an average of £14,153 a term (£42,459 a year), compared with £10,123 (£30,369 a year) eight years ago.
A growing share of families are seeking financial support from grandparents. A small survey by lender Premium Credit found that 35 per cent of parents with children in private education received help last year; of these, 69 per cent relied on grandparents.
Among them is 46-year-old business owner, Victoria Borman, who faced taking on a third job to pay her son Ryan’s private school fees. Instead, her mother, Angela Gourd—fondly referred to as Supergran—stepped in. Gourd has covered roughly £7,800 for Ryan’s current academic year at Bedford School, thanks to a scholarship and bursary that substantially lowered the headline fee of £16,684. She has also paid £3,800 for a school rugby tour to South Africa, plus £600 on uniform and training gear.
“Mum simply said, ‘I’ve left Ryan money in my will anyway, and there’s no point in it just sitting there,’” explains Borman. “He’s exceptionally happy, she loves seeing him flourish, and I’m spared having to work around the clock. It’s a win-win.”
The Chancellor, Rachel Reeves, announced last autumn that pensions would be made subject to inheritance tax (IHT) from April 2027. This has prompted some grandparents to draw on their pension pots earlier than planned.
“Grandparents were originally leaving their pensions untouched as they were exempt from inheritance tax, but now they’re considering spending the money in their lifetimes,” says Kirsty Stone of financial advice firm The Private Office. “Families want to make gifts sooner rather than later, and for many, school fees offer the perfect opportunity.”
Figures from the insurer SunLife suggest that one in four people over 50 has given substantial cash gifts to relatives in the past five years, averaging £20,021. A separate survey by investment platform Moneyfarm found that one in six grandparents regularly supports their adult children and grandchildren, handing out an average of £71,942 over a lifetime.
There are clear tax advantages to giving while you’re still alive. Under the seven-year rule, any money gifted is exempt from inheritance tax if you live for seven years after making it. The annual gift allowance of £3,000 is free of IHT, and you can also give unlimited individual gifts of up to £250 to different people each year without affecting this allowance. Parents may give £5,000 and grandparents £2,500 in tax-free wedding gifts on top of the annual exemption.
Experts warn that generosity should not come at the expense of a financially secure later life. “Grandparents shouldn’t jeopardise their own retirement by stepping in to pay school fees,” says Gianpaolo Mantini from wealth manager Saltus. “No matter how well-intentioned, it’s essential to plan for future expenses and healthcare needs before making large gifts.”
Nevertheless, with private education costs steadily climbing—and the government’s new tax on fees pushing them even higher—families are likely to continue looking to the ‘bank of gran and grandad’ to keep children in their chosen schools. Whether this financial lifeline will be enough to secure the next generation’s education without leaving older benefactors vulnerable is a dilemma more families are now grappling with.
