Wednesday, August 20, 2008

Education Fees

With all the talk about the re-introduction of Third Level Education Fees, perhaps it is time to give some consideration to designing an appropriate savings product that would give some incentive to those that wanted to fund for a childs future education.

I do not think that it would be too difficult to get all relevant parties to sit down and thrash out an agreed structure. All the 'dots' are in place, so it would just be a matter of joining them all up with straight lines, right?

Here is my 'proposal' for a 'DESSie', Designated Educational Savings Scheme.

The Designated Educational Savings Scheme would allow Donors to fund for the future educational expenses of a named Beneficiary.

Anyone could contribute on behalf of a named beneficiary to a 'Designated' Deposit Account or Unit-Linked Fund. The Deposit type account would be similar to those offered under the SSIA Scheme and Banks/Building Societies would compete on interest rates.

The Unit-Linked funds could be either an Index Tracker or Managed type fund with a maximum annual management charge of 1.25% and no other charge.

The accounts that the funds are invested in would accumulate tax free and would be distributed tax fee for qualified educational expenses. These expenses would include tuition fees, books, supplies, equipment and accommodation for Secondary or Third Level Education.

A ‘non-qualifying’ expense could be taxed at 41%(?). The only exception to this penalty would be on disability, death or where the beneficiary attained a scholarship. That is, no tax on the funds if any of these events arises.

The current system allows for gross roll up on these funds where the tax is payable on the 8th Anniversary of the plan at the rate of 41%. Deposit type accounts are liable to D.I.R.T. These should not apply to a DESSie

An account would have a lifetime contribution limit of €20,000(?) and the funds must be used by the 25th (?) birthday of the beneficiary. The payment can be a single payment, regular payment, or combination of both.

It would also be a requirement that these plans are transferable to other family members for qualified educational expenses as the named beneficiary may not, for instance, go on to third level education.

The accounts would have a minimum term of 5(?) years before any distributions are made from them. Distributions before this date would be taxed @ 41% (?).Life Offices and Banks responsible for collection.

Please add your comments and ideas.


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