Struggling to buy a home? Turn to the bank of mum and dad, says Clegg

Up to 250,000 parents and grandparents will be able to use money from their pension funds to pay mortgage deposits for their children and grandchildren, the Liberal Democrat leader Nick Clegg announced yesterday.

Under the plan, unveiled at his party's conference in Brighton, workers will be able to use any lump sum element of their pension and offset it against the cost of a deposit for their children to buy their first home.

Party sources said they estimated that up to 250,000 families would be eligible to take advantage of the "pensions for property" scheme – securing deposits of about £10,000 each.

However, they admitted that specific details of the plan had yet to be agreed with lenders and pension providers. They also confirmed that parents could lose all or part of their pension if house prices fell or their children defaulted on mortgage payments. "We realise this is not going to be the right scheme for everybody but that doesn't mean we shouldn't make the option available," said one Liberal Democrat source. "It is about pushing innovative ideas to help young people get on the housing ladder."

Banking and pension industry sources were markedly less enthusiastic. One said the idea wa fraught with difficulties, while the Association of British Insurers (ABI) said it would need to examine the details carefully before endorsing it. "Pensions are designed to mature into a decent retirement income, not for other purposes," said Otto Thoresen, director general of the ABI. "Any scheme which uses pensions as a guarantee must ensure that it does not inadvertently make the saver worse off when they retire."

Mr Clegg told delegates the scheme could open up another source of funds for first-time buyers. "We have thousands of young people who are desperate to get their feet on the first rung of the property ladder but deposits have doubled and the number of young people asking help from family members has doubled," he said. "[We are] going to do something that hasn't happened before: we are going to work out ways in which parents and grandparents [can] help their children and grandchildren buy a property of their own … We are going to allow those parents and grandparents to act as a guarantee if you like so their youngsters ... can take out a deposit and buy a home."

Liberal Democrat sources claimed that of the 250,000 people who had a pension pot of more £40,000, about 5 per cent – 12,500 – were likely to take up the scheme. They said it was not yet clear if legislation would be required but they were confident the plan would be in operation by 2015.

News of the new scheme came as Mr Clegg admitted that he had been unable to persuade the Tories of his party's plans for a mansion tax on Britain's most expensive properties.