School and University Fees Planning - UK

INTRODUCTION AND ABBREVIATIONS

Scope of the report

Mintel's consumer survey on educational fees planning

Definitions

Other reports of relevance

Key sources

Global information and research

Consumer research

ACORN

ABBREVIATIONS

EXECUTIVE SUMMARY

The size of the independent school population

Rising fee inflation

Gradually widening client base for school fees plans

Growth in HE participation...

...but costs escalate

Channelling parental contributions into a structured approach

Sizing the target audience

Figure 1: Potential size of the target audience for education-related investment/financial plans, 2006

Expenditure on school and university fees

Figure 2: Proportional distribution of expenditure, by funding method, 2006/07

The market is largely catered for by a few specialist advisory firms

The main findings of Mintel's consumer research

Funding methods

Figure 3: Actual/expected method of funding school fees and university costs, by main target groups, January 2006

Attitudes to saving and planning behaviour

In conclusion

MARKET BACKGROUND

The importance of planning ahead

A range of options and factors to consider

The most common methods of funding education

Earned income

Own savings and investments

Bespoke educational fees plan

Endowments are no longer in favour...

...although traded endowments do hold appeal for some investors

A balanced portfolio is best

Annuities

Scholarships and bursaries

Children's savings products

The Child Trust Fund

Other options

Relative contributions

Loans and equity release

MARKET FACTORS

DEMOGRAPHIC AND SOCIAL TRENDS

The UK child population continues to fall steadily

Figure 4: UK population, by age band, at two-year intervals, 2004-10

There are 8 million adults in the UK regularly saving for children

Figure 5: Proportion and estimated number of adults saving regularly or occasionally for children, July 2005

ECONOMIC AND INVESTMENT CONDITIONS

An improving savings climate

Figure 6: Total PDI, consumer expenditure, savings and the savings ratio, at 2000 prices, 1995-2010

The significance of interest rates

Stockmarket turnaround boosts appeal of equity investments

Figure 7: FTSE 100 and FTSE All Share - daily index movements, January 1999-December 2005

EDUCATION, COSTS AND GOVERNMENT POLICY

Public expenditure on education

Figure 8: Public expenditure on educational institutions as a percentage of GDP by level of education, 2001

Nursery education and childcare costs

Some 7% of all pupils are independently educated

Figure 9: Number of pupils at independent (non-maintained) schools and as proportion of all school pupils, 1970/71-2003/04

Slight fall in ISC pupil numbers in 2005 as demographic trends take effect

Figure 10: Total pupil numbers in ISC member schools, 1982, 1987 and 1992-2005

The appeal of independent schools

The cost of an independent education

Figure 11: Average independent schools fees, January 2005

Figure 12: Range of school fees, by type of school, 2004/05

Keeping up with inflation

Figure 13: Fee inflation (annual percentage growth), 1998/99-2004/05

Education reforms: a 'radical new school system' proposed

Trust schools

School fees plans increasingly need to build in strategies to meet the added cost of HE

Number of HE students doubles in a decade

Figure 14: Number of students in Further and Higher Education, 1970/71, 1980/01, 1990/01 and 2002/03

HE participation rate increasing steadily

Figure 15: Illustration of the Higher Education API for Great Britain, by social class 1990/91- 2001/02

Further expansion expected

The rising cost of a university degree course

Figure 16: Summary of maximum amounts of financial support for students starting Higher

Education at university or college in 2006/07-2008/09

Figure 17: Summary of annual help with living costs, by household income band, 2006/07

Student debt

Parental help

Figure 18: Proportion of students receiving help from parents/guardians and other family members, by top mentions, 2000 and 2005

Sources of income

Figure 19: Proportional distribution of student income, by source of income (England & Wales), 2002/03

MARKET SIZE

The size of the target audience for educational fees planning

Figure 20: Summary illustration of the size of the potential target audience for specific investment/financial plans, 2006

Total education bill can cost parents tens of thousands of pounds

Figure 21: Total education bill for the average child independently educated at senior level plus university costs, 2002/03, 2004/05 and 2006/07

Total annual expenditure by individuals on educational expenses

Figure 22: Estimated annual expenditure on educational expenses, by UK individuals, 2002/03, 2004/05 and 2006/07

Distribution of school fees expenditure by funding method

Figure 23: Estimated expenditure on school fees and university costs, by funding method, 2006/07

KEY PLAYERS AND THE COMPETITIVE ENVIRONMENT

Financial planning: a multi-disciplined profession

A 'niche' market, but with much potential

Specialist advisers

Multi-disciplined firms

DISTRIBUTION AND PROMOTION

The best channels to reach prospective customers

Figure 24: Profile of school and university fees planning target groups, by new technology usage, newspaper readership, commercial TV viewing and ACORN category, January 2006

A market heavily reliant on personal communication channels

THE CONSUMER 1: ASSESSING THE TARGET AUDIENCE

A sizeable target audience

Figure 25: Proportion of adults with children, by age band, January 2006

Over three fifths of 35-44-year-olds have children aged under 15

Figure 26: Proportion of adults with children aged 0-25, by gender, age and socio-economic group, January 2006

A third of parents with older teens say their offspring are definitely going to university

Figure 27: Parents' education commitments/expectations, by age group of child, January 2006

One in four parents with children aged 0-4 pay towards childcare

Figure 28: Parents' education commitments/expectations, by age group of child (family lifestage), January 2006

Household income is a major determining factor

Figure 29: Parents' education commitments/expectations, by gender, age, socio-economic group, working status, household income and tenure, January 2006

Profiling the main target groups for educational fees planning

Figure 30: Profile of the target groups for school and university fees planning, by gender, age and socio-economic group, working status, tenure and household income, January 2006

North West has a high concentration of 'school fees planning' prospects

Figure 31: Profile of the target groups for school and university fees planning, by detailed lifestage, marital status and region, January 2006

Wealthier demographics strongly in favour of independent education

Figure 32: Profile of the target groups for school and university fees planning, by ACORN category, new technology usage, newspaper readership, TV viewing and supermarket preference, January 2006

Setting an example: well-educated parents have similar aspirations for their children

Figure 33: Profile of the target groups for school and university fees planning, by respondent parent's leaving school age, January 2006

THE CONSUMER 2: FUNDING METHODS & SAVING HABITS

How do parents finance their children's education?

400,000 parents favour bespoke school fees plans

Figure 34: Actual or expected method of funding school fees - all parents and specific target group, January 2006

More than one method is often needed

Figure 35: Actual or expected method of funding school fees, by top three methods, January 2006

School fees planning appeals most to ABC1s and mid-to-high income groups

Figure 36: Actual or expected method of funding school fees, by gender, age, socio-economic group, working status, household income and tenure, January 2006

Around a third of parents would use income to support children at university

Figure 37: Actual or expected method of funding university education - all parents and specific target group, January 2006

Many savers also favour bespoke plans and equity release

Figure 38: Actual or expected method of funding university education, by top three methods, January 2006

Younger parents keen on accumulating a 'uni fund' via a designated plan

Figure 39: Actual or expected method of funding university education, by gender, age, socioeconomic group, working status, household income and tenure, January 2006

Two fifths of parents like to financially plan ahead...

Figure 40: Attitudes towards financial planning and saving behaviour, by target groups, January 2006

...and planners tend to be better at saving

Figure 41: Attitudes towards financial planning and saving behaviour, by top six responses, January 2006

A lack of preparation could limit one's options

Figure 42: Attitudes towards financial planning and saving behaviour, by methods of funding school fees, January 2006

One in six parents who pay university costs out of income wished they'd started saving earlier

Figure 43: Attitudes towards financial planning and saving behaviour, by methods of funding university costs, January 2006

A fondness for planning increases with age

Figure 44: Attitudes towards financial planning and saving behaviour (top five responses), by gender, age, socio-economic group, working status, household income and tenure, January 2006

Men are more likely to say their partner takes care of the family finances

Young parents are particularly keen on receiving information and advice

Figure 45: Attitudes towards financial planning and saving behaviour (final three responses), by gender, age, socio-economic group, working status, household income and tenure, January 2006

THE FUTURE

University fees planning: a market largely untapped

Publicity surrounding top-up fees should prompt more parents to act

Market potential is significant

Building links with big brands a possibility?

Positive backdrop to investment and planning activity

FORECAST

Figure 46: Forecast of annual expenditure on educational expenses, by UK individuals, 2006/07- 2010/11

Factors incorporated

APPENDIX: RESEARCH METHODOLOGY