The September quarter CPI figures* show that over the past 12 months education costs have increased by 5.2 percent, second only to increases in the cost of alcohol and tobacco at 7.3 percent, says Mr Matt Walsh, head of Lifeplan.
Educating children is becoming an increasingly expensive business, and year on year the costs consistently outstrip inflation. Unfortunately on the education front, families educating their children are falling behind.
“More and more it would appear that grandparents are stepping in to fill the education savings gap,” Mr Walsh says.
“Nearly one quarter (over 23%) of Lifeplan Funds Management’s education policies are commenced by investors age 60 or over.
“The needs of retirees wanting to fund their grandchildren’s education are twofold. Typically, these grandparents are seeking the ability to retain control and, if needed, access the investment for their own use should an unexpected situation arise. However, they are also concerned with ensuring they are not paying any unnecessary personal tax and protecting their entitlements, such as the Commonwealth Senior Health Card.
“Education funds, such as those on offer from Lifeplan Funds Management, are an attractive option, as it ticks these boxes for the grandparents and provides benefits for the grandchildren,” Mr Walsh says.
The Lifeplan Education Investment Fund is a “scholarship plan” in accordance with the Income Tax Assessment Act 1997. This entitles Lifeplan to obtain a tax benefit, which is passed on to the investor, worth up to $30 for every $70 of earnings used to pay education expenses.
Other features of this type of investment include the ability to choose to withdraw funds from contributions and investment earnings, and no annual tax obligations for the investor or the nominated student, while the investment remains in the Fund.
Mr Walsh cites the example of John and Jennifer, grandparents to the newly born Max. They want to provide education support of $10,000 each year of secondary education and for up to four years of tertiary – a total of 10 years.
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