Grandparents fund university degrees to avoid inheritance tax net
Wealthy grandparents are choosing to fund their grandchildren’s university education over leaving a large inheritance as they look to avoid the shake up to the tax system. The bank of grandma and grandad has played a greater role within UK families in recent years, as parents continue to be squeezed by rising costs. In particular, [...]
In recent years, wealthy grandparents in the UK have increasingly chosen to fund their grandchildren's university education, rather than leaving large inheritances. This shift in strategy is driven by the need to avoid the impending changes to inheritance tax. As the cost of higher education continues to rise and students face hefty loan debts, grandparents are stepping in to help, with nearly two-thirds of students citing their grandparents as a source of financial support.
According to Rathbones, one in five grandparents cover all or most of the university costs, while 59 percent reported that family support is combined with student borrowing. This trend is particularly prevalent due to the looming changes in inheritance tax, which will affect unused pension wealth from April 2027. With nearly 70 percent of grandparents admitting that the prospect of inheritance tax influenced their decision to fund education during their lifetime, it's clear that financial planning extends beyond just ensuring their grandchildren's success.
Malvee Vaja, a chartered financial planner at Rathbones, explained that for many grandparents, helping with education serves a dual purpose: supporting the children and grandchildren at a critical stage of life while also contributing to a broader intergenerational wealth transfer strategy. However, this generosity comes with concerns over the high student loan interest rates, which remain at up to six percent for the upcoming 2026/27 academic year.
The Department of Education's decision to maintain these rates has sparked backlash from graduates who feel they are being burdened with swelling debt.
Furthermore, parents are also feeling the weight of student loans, with more than a quarter contributing or expecting to contribute towards university costs. With an average expenditure of £50,000 per child, parents are becoming more aware of the debt burden attached to a degree. As a result, some are opting to repay student loans upon graduation, while others are choosing to fund their children's education entirely to alleviate the financial strain.
Written by urgent.news from City AM's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
