Diva Nair, Associate Director of Finance at Northern Education Trust, shares how a simple change to the trust's banking arrangements transformed their annual interest income from tens of thousands to more than a million pounds and explains how other schools and trusts can achieve similar results.
The challenge: making money work harderWhen I became finance manager at Northern Education Trust in summer 2021, despite managing fairly large bank balances across the schools, we were earning minimal interest.
By reviewing our banking arrangements, we have benefited through:
Credit balance aggregation – resulting in increased annual interest income from tens of thousands to over one million pounds Low risk to funds – the trusts money stays in existing accounts at a major banking institutionNorthern Education Trust operates 13 primary and 17 secondary academies across areas of high deprivation. Our schools consistently achieve 'good' or 'outstanding' ratings, with exam results improving year on year.
Like many trusts, we weren't maximising returns on our cash reserves. Prior to 2022, we were earning between £10,000 and £20,000 annually in interest across all our accounts. For an organisation of our size, this felt inadequate. We needed our money to work harder for our pupils.
Exploring options: balancing risk and rewardInitially, we looked at different banking platforms, considered options where you can distribute funds across multiple institutions to maximise Financial Services Compensation Scheme protection whilst earning better returns.
It's always that balance of risk versus reward. Being within the public sector, the security of assets is paramount versus maximising returns.
It was at the point we that were preparing to move funds that the relationship manager at our bank proposed an alternative: credit balance aggregation.
Credit balance aggregation means all money held across various accounts is aggregated, allowing the trust to earn a significantly better interest rate on the combined total.
The attraction was its simplicity and security. We didn't have to move trust funds around, which always has risk attached. The money stayed where it was and earned interest based on the larger aggregated amount.
The approval process took four to five months, and was time well spent to explain everything clearly to our trustees.
The thorough process meant that by the time we were ready to move forward, our trustees weren't just saying 'yes' because they had to - they genuinely believed in what we were doing. They understood how it would benefit our pupils and felt equipped to champion the change throughout the school community
The results: transformational financial impactThe results have been remarkable.
Our trust now earns approximately £100,000 per month in interest and in our first full year we generated over £1 million in additional income.
When you consider the fees versus the amount of interest you can earn compared to fee-free accounts elsewhere, the earning potential far outweighs any charges.
This additional income supports our integrated curriculum-led financial planning approach. Rather than simply adding to reserves, we ensure every pound serves our core mission: improving outcomes for children.
The extra income supports capital projects and enhances our ability to maintain consistent investment in teaching and learning across all schools.
Sharing success: supporting other trustsWe've actively shared our approach through regional networks. We have invited our bank to present their solutions to forums that the Northern Education Trust are present at.
We're also part of the Northern Alliance of Trusts, comprising eight academy trusts that benchmark against each other and share good practice. This collaborative approach ensures successful innovations spread throughout the sector.
For school business professionals considering similar changes, my advice is straightforward but important: Change is always scary but reach out to others who have done it. People in our sector want the best for everyone, so we're always open to sharing our experience.
The key is patience and persistence; the financial benefits make the effort worthwhile. Even smaller schools could benefit significantly from reviewing their banking arrangements and challenging their providers.
Even if it's not the exact solution we have, just looking at the market will reveal better rates with different accounts. Sometimes simply negotiating with your current bank can yield improvements without the complexity of changing providers.
Looking forwardOur success demonstrates that pro-active financial management can generate substantial resources for education.
For any trust or school leader reading this, I encourage you to examine your current banking arrangements. Challenge your providers, explore options, and don't be afraid to ask for better terms. The potential rewards for your pupils make the effort worthwhile.
The education sector shouldn't accept poor returns on cash reserves when better options exist. With proper due diligence and patience through governance processes, significant additional income is achievable – income that can directly benefit the children we serve.
Learn more about savings options for schools to see if your school or trust's money could be working harder for your pupils.
Any savings, benefits and outcomes described in this case study were provided by Northern Education Trust and reflect its specific experience and circumstances. Individual results will vary between schools and trusts.
seen at 14:41, 25 September in Maximising Value for Pupils (Max VP).