With the recent news that University Fees will increase to £9,000 a year, many parents who won’t be sending their children to university this year, the last at the lower rates, face up to the financial nightmare ahead.
With many parents old enough to be able to take some equity from their pensions by the time their children have reached university age, an increasing number will have to turn to pension release to help their children through their courses.
Pension Release will see parents taking up to 25% of their pension funds tax free, and will be available to those over 55 years of age. Whilst being an option, many fail to stop and think about how the decision will affect their own retirement.
With annuity rates decreasing every year, parents will need every penny they can get their hands on to help with the costs of retirement, and if they still work, they will put themselves in the higher tax bracket for that year, as the money taken will, despite being tax free, be taken into account whilst working out tax for their job.
Unfortunately, the stark reality is, many parents don’t have any option.
Ann Fitzgerald from Wycombe told us, “I’ve got two boys currently in years 10 and 11, both of whom want to go to university. If I don’t take money from my pension they’ll both be left with debts of over £40,000. We don’t earn badly, so they won’t get much help from the government, but don’t have savings and this is the only way.”
When asked about her own future, Ann replied, “I’ll worry about myself later, I’ll just have to work into my retirement.”
Unfortunately for people like Ann, they don’t feel they have a choice.