WWYD - taking 25% tax free lump sum earlier than originally planned to pay school fees...

tanoshii

Me: 53, 50% share in Ltd company, on track for full state pension, DC pension 120k

Hubby: 56, 50% share in Ltd company, already has required years for full state pension, DC pension 160k, DB pension approx. 15k per annum from aged 65.

Assets: no mortgage on property 1, approx. £1million; no mortgage on "property 2", (located in the same parcel of land, but with separate utilities and separate road access, as property 1), approx. £500k as is if split. Property 1 is our permanent home, for various reasons (including the need for planning permission) we can't or don't want to rent out property 2 for +5 years. 

Situation: buying property 3 near our kids' school (too far to commute from property 1) worth £350k with all our savings and a £100k mortgage (existing offset flexible mtge on property 1)  - 5% interest only, 10 years left, double council tax.  Aim to live there term time and Airbnb it at weekends/holidays with the hope we eventually pay business rates after 12 months and can cover our costs.

With the above purchase we have no money left for school fees. We need 30k for year 1, 40k for year 2, 15-20k for year 3. Thereafter both children will be in state sixth form college near property 1. In terms of income, it can be variable, but we have never not managed to cover our costs. In a bad month we might have £1k disposable income, in a good month £12k.

Would we be mad to take hubby's 25% tax free lump sum now and mine when I reach 55 to pay for school fees? We have an additional option to borrow 200k on the existing flexible mortgage to cover the shortfall. In +5 years, we would look to split properties 1 and 2, sell property 1 and move into property 2. If we can't split, we might get £1.2 - 1.3 million on the sale of both, and of course have the option to sell/rent out property 3 after +3 years. We actively wish to downsize (property 1 is 7 bedrooms, 4 bathrooms, 5 receptions!) I can't decide whether the whole idea is too risky, given that we want to retire when hubby gets to 60 and that our income can be so variable month to month... Unfortunately, it is not an option to put the children in state schools now.  

Marcon

tanoshii said:

Me: 53, 50% share in Ltd company, on track for full state pension, DC pension 120k

Hubby: 56, 50% share in Ltd company, already has required years for full state pension, DC pension 160k, DB pension approx. 15k per annum from aged 65.

Assets: no mortgage on property 1, approx. £1million; no mortgage on "property 2", (located in the same parcel of land, but with separate utilities and separate road access, as property 1), approx. £500k as is if split. Property 1 is our permanent home, for various reasons (including the need for planning permission) we can't or don't want to rent out property 2 for +5 years. 

Situation: buying property 3 near our kids' school (too far to commute from property 1) worth £350k with all our savings and a £100k mortgage (existing offset flexible mtge on property 1)  - 5% interest only, 10 years left, double council tax.  Aim to live there term time and Airbnb it at weekends/holidays with the hope we eventually pay business rates after 12 months and can cover our costs.

With the above purchase we have no money left for school fees. We need 30k for year 1, 40k for year 2, 15-20k for year 3. Thereafter both children will be in state sixth form college near property 1. In terms of income, it can be variable, but we have never not managed to cover our costs. In a bad month we might have £1k disposable income, in a good month £12k.

Would we be mad to take hubby's 25% tax free lump sum now and mine when I reach 55 to pay for school fees? We have an additional option to borrow 200k on the existing flexible mortgage to cover the shortfall. In +5 years, we would look to split properties 1 and 2, sell property 1 and move into property 2. If we can't split, we might get £1.2 - 1.3 million on the sale of both, and of course have the option to sell/rent out property 3 after +3 years. We actively wish to downsize (property 1 is 7 bedrooms, 4 bathrooms, 5 receptions!) I can't decide whether the whole idea is too risky, given that we want to retire when hubby gets to 60 and that our income can be so variable month to month... Unfortunately, it is not an option to put the children in state schools now.  

It's always an option - just not one you want to accept (along with very many other parents who are struggling with school fees). 

Asking what other people would do is rarely productive, since other people aren't in exactly the same situation as you and don't have exactly the same views, priorities etc. A straw poll of random people on a website isn't going to give you anything other than a random result - and certainly isn't going to give you a firm basis on which to take your own decisions.

I completely sympathise with your situation, but that's not exactly helpful! The unpalatable reality may be that you quite simply can't afford to do what you are planning. Back in 2019 you were earmarking those 25% lump sums for university costs: https://forums.moneysavingexpert.com/discussion/5983819/using-25-tax-free-pension-lump-sum-to-fund-kids-university-education#latest

Maybe get some proper professional advice, based on a full understanding of your circumstances and attitudes, as opposed to comments chipped in on the basis of a few paragraphs? 

Bluebell1000

Is there an option to rent a property nearer the school, so that you have cash to cover school fees and pay the rental without touching your pension?

DRS1

You couldn't find a cheaper/closer school?

Why are you buying property 3?

Is the school a boarding school?  I am sure some people could tell by the level of the fees if they are boarders or day pupils.

If they are day pupils and you need to be closer to them why not rent somewhere if it is only for 2 or 3 years?

Hoenir

tanoshii said:

 I can't decide whether the whole idea is too risky, given that we want to retire when hubby gets to 60 and that our income can be so variable month to month... Unfortunately, it is not an option to put the children in state schools now.  

Withdrawing £90k from your pensions now appears neither here or there in the bigger scheme of things.  As with all matters financial on paper looks so easy. The reality is that it's the unexpected curved balls in life that blow the best laid plans off course. When financal stress hits everything can unravel very quickly. Particularly if one is leveraged to the hilt with no zero ability to absorb shocks. 

Marcon

DRS1 said:

You couldn't find a cheaper/closer school?

Why are you buying property 3?

Is the school a boarding school?  I am sure some people could tell by the level of the fees if they are boarders or day pupils.

If they are day pupils and you need to be closer to them why not rent somewhere if it is only for 2 or 3 years?

They are clearly day pupils - otherwise travel distance wouldn't be an issue: 'buying property 3 near our kids' school (too far to commute from property 1)'.

The fees quoted are going to be a 'top up' to other available parental funds - they wouldn't cover 3 children at private schools.

Ibrahim5

I don't understand. Surely it will be the most frightful experience for them when they end up in a STATE sixth form college. Will they be prepared for the sort of student that they may meet there?

ali_bear

My thoughts exactly. 

DRS1

Marcon said:

DRS1 said:

You couldn't find a cheaper/closer school?

Why are you buying property 3?

Is the school a boarding school?  I am sure some people could tell by the level of the fees if they are boarders or day pupils.

If they are day pupils and you need to be closer to them why not rent somewhere if it is only for 2 or 3 years?

They are clearly day pupils - otherwise travel distance wouldn't be an issue: 'buying property 3 near our kids' school (too far to commute from property 1)'.

The fees quoted are going to be a 'top up' to other available parental funds - they wouldn't cover 3 children at private schools.

I am (fortunately) unfamiliar with the cost of private schools these days but what is the additional cost of making the children boarders instead of day pupils?  If they boarded then commuting would only come into it about 6 times a year (Oh and maybe half term so 12 times).  No need for property 3 at all then.

After all if the OP wants them to have the full public school experience they really are not going to get it just being day pupils

Albermarle

DRS1 said:

Marcon said:

DRS1 said:

You couldn't find a cheaper/closer school?

Why are you buying property 3?

Is the school a boarding school?  I am sure some people could tell by the level of the fees if they are boarders or day pupils.

If they are day pupils and you need to be closer to them why not rent somewhere if it is only for 2 or 3 years?

They are clearly day pupils - otherwise travel distance wouldn't be an issue: 'buying property 3 near our kids' school (too far to commute from property 1)'.

The fees quoted are going to be a 'top up' to other available parental funds - they wouldn't cover 3 children at private schools.

I am (fortunately) unfamiliar with the cost of private schools these days but what is the additional cost of making the children boarders instead of day pupils?  If they boarded then commuting would only come into it about 6 times a year (Oh and maybe half term so 12 times).  No need for property 3 at all then.

After all if the OP wants them to have the full public school experience they really are not going to get it just being day pupils

I just checked at a local posh private school .

Normal fees are nearly £10K per term.
Full boarding would cost another £5K
Sunday to Thursday about £2.5K ( per term) 

Cobbler_tone

I dunno but reading that made me stressed and grateful for my very simple life! 
I would say that buying a third property to reduce a commute is either extreme decadence, or borderline madness. I guess there is money in property but owning multiple isn't what it used to be, especially if funding Air bnb's on top.
I'd put them in an Uber personally!

You can access the lump sums, yours at 55. Looking at your husband's age and projected pension at 65, I don't think that will be a huge amount. Yours will depend on the level of your contributions over the next two years. You might be better served putting £90k on the mortgage, as you don't seem against some debt.

Don't worry, they grow up eventually!