Wealth management firm Rathbones has found that 67% of wealthy grandparents are contributing to their grandchildren's education costs, with tax planning a major factor in their decision. A quarter of respondents said tax planning was a “major factor”, while 70% said inheritance tax played a role.
How Grandparents Are Helping
One in five told the firm that they pay most of their grandchildren’s higher education costs, while 7% said they cover all of the bill. These payments are being used alongside loans to meet the cost of university. More than a third of grandparents give money directly to their grandchildren, while a smaller portion gives the money to their children.
Around 34% of wealthy grandparents said they pay the university directly, while another third said they had set aside savings for education.
Tax Reforms and Wealth Transfer
Under tax reforms in April 2027, unused pension pots will be inheritance tax-eligible, prompting older generations to pass on their wealth during their lifetimes. Malvee Vaja, chartered financial planner at Rathbones, said: "For many grandparents, helping with education can achieve two objectives at once: supporting children and grandchildren at a crucial stage of life while potentially forming part of a broader intergenerational wealth transfer strategy."
She added: "The Bank of Grandma and Grandad is no longer just helping younger generations onto the property ladder. Increasingly, it is helping fund education too. Many grandparents tell us they would rather provide support when the impact is immediate and visible than leave a larger inheritance later."
Concerns Over Inequality
Ms Vaja also flagged a troubling societal dimension to the trend. Over eight in ten respondents believe escalating education costs mean life prospects are becoming ever more tied to a family's financial resources. "As education becomes more expensive, there is a risk that opportunities become increasingly linked to family wealth rather than ability and ambition alone," she warned.
The financial burden of a degree is also weighing heavily on parents, with previous Rathbones data showing that 26% of those who contribute or plan to contribute anticipate spending upwards of £50,000 per child on university costs.
