Pay Times 2019: Minimum wage increases and Student Loan changes see young people benefit from budget – for now

The statutory national minimum wage in the UK was 20 years old this year – the same age as many of those who are now benefitting from its introduction – and while younger employees have often been among those who have gained most from this safety net, the biggest increase this year was for the over-25s.

As of 1 April 2019, they have seen a rise of 4.9% in their minimum hourly rate (also known as the national living wage), to £8.21 an hour – worth around £690 to a full-time worker over the year.

The increase announced by the Government was recommended by the Low Pay Commission (LPC), which estimates that it will make a positive difference to around 2.4 million workers. The Government has said that (subject to continuing economic growth) it aims to ensure the national living wage reaches 60% of median earnings by 2020, and estimates that it will be £8.62 next April. But that’s still short of the real Living Wage, set by the Living Wage Foundation and independently calculated based on the costs of a decent standard of living. The Foundation is calling for a Living Wage of £10.20 per hour in London, and £8.75 per hour across the rest of the UK.

The Government accepted LPC’s recommendations on the national minimum wage rates across the board. So as of 1 April:

  • the rate for 21 to 24-year-olds increased by 4.3% to £7.70 per hour
  • the rate for 18 to 20-year-olds increased by 4.2% to £6.15 per hour
  • the rate for 16 to 17-year-olds increased by 3.6% to £4.35 per hour
  • the rate for apprentices aged under 19, or those over 19 but in the first year of their apprenticeship, increased by 5.4% to £3.90 per hour.

While young people in work and those on lower wages had reason to be encouraged by this year’s budget, there was positive news too for those embarking on or recently completing their university studies.

The repayment thresholds for student loans changed as follows:

  • the repayment threshold for Plan 2 loans (all English and Welsh student loans for those who started university in 2012 or after) increased from £25,000 to £25,725 per year
  • the repayment threshold for Plan 1 loans (all loans for those who started studying between 1998 and 2011, as well as Scottish and Northern Irish student loans since 2012) increased from £18,330 to £18,935 per year
  • the deferment threshold for pre-1998 loans increased from £29,219 to £30,737 per year.

The threshold for the recently introduced postgraduate loans remains unchanged, at £21,000 per year.

However, while the changes to the threshold levels have generally been viewed positively, the student loan focus has changed over recent weeks, following the publication of a government-commissioned review of funding for over-18 education. The review’s recommendations of reducing maximum annual university fees from £9,250 to £7,500, and reintroducing maintenance grants for poorer students, have been welcomed in most quarters.

But the review has also called for loan deductions to continue for 40 years, rather than any unpaid amounts being cancelled 30 years after graduation, as currently happens, and for the repayment threshold to be reduced back down from £25,725 a year to £23,000.

While the lowest and highest graduate earners would be largely unaffected by the changes, those in the middle could see lifetime payments increase from £14,844 to £26,667, as a result of the lower payment threshold and having to pay for an extra 10 years.

This article was written by Amy Sadler. If you have any questions regarding this article you can contact Amy using the form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.


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