Pay school fees in advance or invest money??!

I agree on the point about needing cast iron protection on the cash paid in advance, just like you would have in a bank account, otherwise it becomes speculative / risky.

Also you mention the alternatives include fixed bonds at 1-2% (taxable) or paying off a mortgage which is presumably also somewhere around 2% (presumably no tax effect unless its a mortgage on a BTL property in which case paying your mortgage reduces interest cost and increases profits and thereby 20% income tax on the interest 'saved')

It's important to realise that those rates earned on savings deposits or saved on lower mortgage interest are annual amounts, whereas the discount for upfront school fees are a one off saving covering a few years.

For example if you take the 4 year deal you are saving fee in year one and year two and year three and year four. So, some money off your bill in the first year but also some money which wouldn't have been paid until the second or third year or fourth year. For simplicity of really rough numbers you can probably average it and say it would all have been due at the end of the second year. So, by taking the deal you are saving money - on average - in two years time.

Therefore it is like getting 3% given to you in two years time. Don't think to yourself "oh well 3% is better than the 2% I could get on a deposit account or the 2% I could save by paying off mortgage". Because saving rates and mortgage rates are per year. Whereas the offer is only to get 3% of cost saving in about two years time on average, which is only about 1.5% a year and therefore actually sounds lower than the 2% you might find on mortgage payoffs or on savings (though tax would reduce the savings income to some lower net amount depending on personal circumstances) .

So, (assuming absolute security of the cash you give them), taking the discount and paying up front it might be a bit better than messing around with alternative uses for the money or it might not be, but it does not seem massively compelling as a clear winner. If the discounts were several percent higher, or if they protected you from price rises, then they would be more compelling - but I wouldn't be falling over myself to sign up at those rates you've been offered.

Given you're not really saving loads in the context of bank saving accounts or mortgage payoffs, it's not really 'peace of mind' to settle up now, because if they want to put the price up they can still come after you for more money, and you need to hope the guarantee / trustee document is worth the paper it's printed on. If the potential saving is not massive, you would probably sleep more soundly in your bed with a massive pile of cash in bank accounts guaranteed by the financial services industry as a whole and ready to cope with whatever challenges life throws your way.