Parents' pensions used to pay for children's university

Parents are risking their financial security to ensure their offspring's education is completed.

Research by Norwich Union shows 20 per cent of parents are turning to their pension pots, credit cards and overdrafts to pay for their children's education.

Some 13 per cent admitted they would remortgage to raise funds, 16 per cent would take a second job, and 38 per cent would drop holiday plans.

A third of those polled revealed they feared both their children and themselves would face debt as a result of going to university.

As a result, 46 per cent of parents with children going to university will encourage their children to stay at home and 23 per cent will urge their offspring to work.

One in five teenagers say they will take a year out in order to earn cash.

Cheryl Cox from Norwich Union said: "Another generation of UK teens will enter higher education this autumn and, while parents may well be filled with pride, this looks set to be overshadowed by fear and panic over how they are going to shoulder the financial burden.

"We all want to do the best for our children but, by making the ultimate sacrifice and using their pension funds to cover the costs, a fifth may face a bleak financial future."

The short-term gain of dropping pension contributions may benefit your finances, but the loss will add up over time and cause a major dent to your pension pot and retirement income.

Data from investment managers Brewin Dolphin show a 32-year-old man aiming to retire at 58 and saving £400 a month into his pension fund could expect a £791,760 pension pot in 2034.

However, if he stops paying into his pension for a year, the pot would be worth just £756,201 – a saving of £4,800 today, but leading to an eventual loss of £35,559.