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Can we educate our children privately and retire in 17 years?

These investors want to gift £160,000 to each of their children and retire within 20 years
Can we educate our children privately and retire in 17 years?
  • These investors need to work out whether they can afford to give their children nearly £500,000 and retire as soon as they plan
  • They should get professional advice on whether to consolidate their pensions
  • They should invest their children's savings rather than hold them in cash
Reader Portfolio
James and his wife 50 and 44

Pensions, Isas and general investment accounts invested in funds and shares, cash, residential property.


Send children to private schools, give children £160,000 each for home deposits and university costs, retire at ages 67 and 62 on £48,000 a year, give children inheritance, preserve capital value of investments, manage pensions lifetime allowance, consolidate pensions, investment return of 5 per cent a year, invest cash.

Portfolio type
Investing for goals

James and his wife are ages 50 and 44. He earns £195,000 a year plus a bonus of around £30,000. His wife earns £20,000 a year.

They have three children aged 11, nine and seven.

Their home is worth about £900,000 and has a mortgage of £225,000.

"We would like to give our kids money for deposits to buy homes – maybe £100,000 each," says James. "We would also like to help them cover their university fees and living costs by giving them £60,000 each. And we may send them to private schools from next year and estimate that this will cost £105,000 each.

"I'd like to retire at age 67 and my wife would like to retire at around 62, and we want a retirement income of £48,000 a year after tax. I’d like to generate this without eating into the capital value of our investments, if possible, because we'd like to leave the kids an inheritance.

"I and my employer contribute £29,250 a year to my pension which is worth about £563,000. I also have a former workplace additional voluntary contribution (AVC) pension worth about £23,600 invested in a cash fund with high fees that’s unsuitable for long-term investment. The pension trustees are going to move this into a sustainable multi-asset fund, but I may transfer it into my current workplace pension. I also have a defined benefit (DB) pension with this employer which is set to pay out £2,707 a year – a level which was frozen in 2000.

"However, I am concerned about exceeding the pensions lifetime allowance which seems quite possible with contributions of about £29,000 a year for another 17 years. But I don’t want to forgo any employer contributions as a result of reducing mine.

"My wife's current workplace pension is worth £21,400, and she contributes contributes 9.3 per cent of her salary to it and her employer contributes equivalent to 20.7 per cent of it a year. She also has three former workplace pensions which she plans to consolidate into her current workplace pension.

"We also save £40,000 a year outside pensions, although may start to spend some of this on school fees from next year. And we expect to receive around £500,000 in the coming years from inheritances.

"I'd like our investments to make a return of 5 per cent a year in real terms. Given the likely size of our portfolio, I think that income of 4 per cent a year after we retire would initially more than cover our desired after-tax income. But I’m concerned about this decreasing in real terms value over time if the capital value doesn’t appreciate.

"We’re far enough away from retirement to be able to take risks with our investments and don’t need to draw on the savings. And in the current inflationary environment we need to take a level of risk to preserve the value of the portfolio. So we think it would be a good idea to move a significant proportion of our cash into investments. We could tolerate the value of our investments falling by up to 25 per cent in any given year, as long as it recovers in the future. But we will become less risk tolerant as we approach retirement.

"I am also thinking of moving my current workplace pension into a higher risk, higher growth fund.

"Each of our children has savings worth £12,000 and we want to invest this as inflation is destroying the value of cash.

"We both hold as many of our non-pension investments as possible in individual savings accounts (Isas).

"Last year I moved the bulk of my cash into exchange traded funds (ETFs) and have since drip fed money into them each month, adding £40,000 over the past year. I have tried to diversify the investments by geography, company size and asset class. I put a larger proportion into funds which track major market indices and a smaller amount into more esoteric investments.

"I tend to buy and hold funds, although I disposed of my bond holdings when interest rates started to rise. Recent trades include selling my own holding in Lyxor Core UK Government Bond UCITS ETF (GILS) and iShares Core Global Aggregate Bond UCITS ETF (AGBP).

"I am gradually increasing the proportion of my portfolios invested in global funds.

"My wife mainly holds funds recommended by her independent financial adviser. But she is considering selling these funds, as they appear to be poor value, and instead investing in ETFs. She also holds considerable amounts in cash Isas but their returns are in effect negative due to high inflation."


James and his wife's portfolio

HoldingValue (£)% of the portfolio
James' workplace pension – L&G PMC Multi-Asset 3 (GB00B5W2CB33)562,95139.31
Wife's former workplace pension147,23210.28
Cash 121,5128.48
iShares Core FTSE 100 UCITS ETF (ISF)58,7004.1
James' DB pension54,1403.78
Lyxor Core UK Equity All Cap UCITS ETF (LCUK)39,3602.75
Wife's former workplace pension36,6322.56
iShares Core MSCI World UCITS ETF (IWDG)30,4922.13
HSBC MSCI World UCITS ETF (HMWO)29,3122.05
JPM Global Unconstrained Equity (GB0030877871)28,7842.01
Vanguard LifeStrategy 80% Equity (GB00B4PQW151)27,8891.95
Wife's lifetime Isa23,8901.67
Legal & General Multi-Index 5 (GB00B8VZ3F59)23,6401.65
James' AVC – Standard Life Deposit and Treasury Pension Fund 23,6121.65
Wife's workplace pension21,4001.49
Wife's former workplace pension20,1531.41
JPM UK Equity Growth ( GB00B3FJQ821)18,1071.26
iShares MSCI USA SRI UCITS ETF (SUUS)16,9111.18
UBS MSCI World Socially Responsible UCITS ETF (UC44)15,0591.05
iShares MSCI Target UK Real Estate UCITS ETF (UKRE)12,8260.9
Aviva Investors Multi-asset Plus IV (GB00B72W9168)12,3530.86
SPDR FTSE UK All Share UCITS ETF (FTAL)11,8370.83
iShares Core MSCI EM IMI UCITS ETF (EMIM)11,7990.82
ASI MyFolio Market III (GB00B758J660)11,6630.81
Aviva Investors Multi-asset Plus III (GB00B581Z480)11,3890.8
ASI MyFolio Managed III (GB00B701F734)10,5250.73
Lyxor Commodities Refinitiv/CoreCommodity CRB TR UCITS ETF (CRBL)9,0270.63
iShares Core MSCI Pacific ex-Japan UCITS ETF (CPJ1)8,1880.57
Vanguard FTSE 250 UCITS ETF (VMID)6,7320.47
Invesco Bloomberg Commodity UCITS ETF (CMOP)4,8080.34
iShares MSCI World Small Cap UCITS ETF (WLDS)3,3110.23
UBS MSCI United Kingdom IMI Socially Responsible UCITS ETF (UKSR)2,9070.2
iShares Asia Property Yield UCITS ETF (IASP)2,8220.2
iShares Ageing Population UCITS ETF (AGES)2,5830.18
Lyxor Core UK Government Bond UCITS ETF (GILS)2,5520.18
iShares Automation & Robotics UCITS ETF (RBTX)2,3140.16
iShares Global Clean Energy UCITS ETF (INRG)2,1980.15
iShares Digitalisation UCITS ETF (DGIT)1,0090.07
United Utilities (UU.)7210.05
Banco Santander (BNC)4710.03
Tritax Big Box REIT (BBOX)3050.02




Michael Lapham, director of financial planning at Mercer & Hole, says:

What will drive your decision on whether to educate your children privately? Is it whether you can still meet your other financial objectives if you do this or are there other considerations?     

If you educate your children privately, this will be your most immediate financial objective. You estimate that the total cost of doing this will be £315,000. You will need to hold this amount in accessible investments, or £195,000 if you are able to spend the £40,000 you are currently saving each year  on school fees.

You can then plan for longer-term objectives. Cash flow modelling would help to determine whether your objectives are achievable. This might illustrate whether you can afford to gift money to your children to buy property as well as meet your own objectives. If you cannot, you may need to consider what your priorities are.    

To have the greatest chance of meeting your financial objectives, you should ensure that your investments are as tax efficient as possible. This means taking advantage of any tax reliefs available when investing monies, minimising the tax payable on investments you hold and paying the lowest amount of tax possible when making withdrawals.

Pension funds are generally the most tax-efficient way to invest. But due to your concerns on the pensions lifetime allowance, only invest as much in this type of wrapper as is necessary to get your employer’s contribution.

Your wife, however, should consider making the maximum possible pension contributions each year.

Also, if she consolidates her pensions into her current workplace scheme, it would be easier for her to monitor and manage them. However, further analysis is necessary to establish the additional benefits that she could purchase and whether it would be advantageous to do this. Transferring pension benefits is complex and requires specialist advice. 

Your pensions are unlikely to be accessible until you are at least age 57. So ensure that you have sufficient capital outside pensions to meet any expenditure that you may have before this time, such as school fees.

You should fully use your annual Isa allowance of £20,000 each year. You can do this by investing new money or moving assets held outside tax-efficient wrappers into Isas.

If you move the money in your children's cash junior Isas (Jisas) into stocks and shares Jisas, this would give them greater potential for growth. You can afford to take higher levels of investment risk with these monies as your children cannot access them until they are age 18, giving them time to ride out any short-term market falls. If your finances permit, you could invest a further £9,000 a year for each child into these accounts.

You could also invest £2,880 a year into pensions for each of your children. However, the money in these would not be available to your children until at least age 57.                 


Rebecca Williams, head of wealth Planning at Brown Shipley, says:

The first priority is securing your family’s financial position as they rely on your income. Check any cover you get with your job and your private policies to see if you have adequate life assurance and income protection. If you die, is the sum assured enough to enable your wife to repay the mortgage and the family to continue their current lifestyle? Would it cover costs including childcare, so that your wife could continue working, and private school and university fees?

It is equally important to protect yourself in the event of your wife's death. If this happens, would you want to scale back your work to spend time with the children? As well as providing a lump sum to pay the mortgage, life assurance can also be structured to provide regular payments to pay for childcare which would allow you to continue earning.

You and your wife should make a holistic wealth plan and get a lifetime cash flow projection, which would help you visualise the future and feasibility of your goals. Inflation and the increasing cost of living are key concerns for families. Historically, private school fees have increased at a rate faster than inflation. A cash flow projection would model the impact on costs of big increases and stress test affordability over the time your children are at school.

School fees, university costs and house deposits will add up to a significant amount. A cash flow projection would help to determine if you can afford these costs, identify sources of funding for them and model their impact on your future finances. If there is a funding shortfall, it would help you to determine whether you need to work for longer, reduce your income expectations in retirement or revise your children's education plans.

You and your wife expect to inherit £500,000. A cash flow projection would help you to work out whether you could afford to gift it to your children for university fees or as house deposits.

You potentially have 17 years until retirement. If you continue to make pension contributions at the same rate until age 67, your current workplace pension and AVC alone could reach a value of £2.8m. However, other priorities may mean that it’s not feasible to continue personal contributions at this level in the longer term. A cash flow projection would help you plan an affordable level of contributions.

The pensions lifetime allowance is frozen at £1,073,000 until 2026. You should regularly monitor the position to keep up to date with legislative changes and discuss your options with an adviser on an ongoing basis.

Your DB scheme will be a valuable source of guaranteed income when you retire but use up some of your lifetime allowance. However, the pension figure you have stated for this is over 20 years old so request up-to-date information on it.

Get professional advice on whether to transfer your AVC. Some DB schemes allow members to have their pensions' tax-free cash paid from the AVC which means that they do not have to give up some of the DB pension income to get this. 

Your wife should also seek advice on whether to consolidate her pensions. Doing this can make administration easier, but it is important to look at the features of each contract and check whether transferring out would incur penalties or lose certain guarantees. She should get professional advice on her civil service and NHS pensions, in particular, and obtain more information on their benefits. Typically, these types of pensions pay out a guaranteed amount of income, an extremely valuable benefit, so it is not usually a good idea to transfer out of them.

You should nominate each other as your respective pensions' beneficiaries in the event of your deaths.

You can get a forecast of your entitlements to the state pension at If there are any gaps in your National Insurance records, you can make up for these with voluntary contributions.

Retain cash worth three to six months' of your family expenses in an accessible account as an emergency fund. It's also sensible to hold money to cover known short-term liabilities, and planned spending such as tax bills and school fees.

Some Jisa providers offer a range of investment options which can be easily managed online. However, investment Jisas may fall as well as rise in value. And at age 18, the child in whose name the Jisa is opened gets control of the account.