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Guidance for university students during the cost of living crisis

by Madaline Dunn

As the UK enters a recession, inflation rises, and the cost of living soars, times are tough, and research shows that students in higher education are increasingly feeling the pinch. Research from Unite shows that around two-thirds of students are now worried about the increased cost of living, and more and more are either considering or proceeding with dropping out.

Recently, a Department for Education (DoE) spokesperson said that it is responding to the crisis by increasing the amount students can access through loans and grants for living and other costs and cited the work of universities in this area. However, many students and those working within education argue that more help is needed and are pushing for more resources to become nationally available. The UUK, a collective of 140 universities, has specifically called on the government to do more to help universities support students.

At The Salary Calculator, we understand how stressful it can be trying to juggle education and financing your day-to-day, so, below we’ll explore:

• Some of the context around student finances right now
• The financial support and advice currently available and how to access it
• Tips to help you stretch your loans and grants

The rise in students struggling with the cost of living crisis

There are no two ways about it, students are really feeling the brunt of the cost of living crisis, and the implications are far-reaching. Working-class students are already underrepresented within higher education, and the current crisis threatens to widen the gap. Figures from the Student Loans Company in September reveal that almost 40,000 students in England, Wales and Northern Ireland permanently withdrew from their courses and stopped receiving student loans by the end of August.

It’s no wonder so many are finding university to be financially unviable, with a recent survey published in July finding that 11% of students were using food banks, with one-third having to rely on credit cards to survive. Moreover, while working to support one’s studies is nothing new, studies show that students are being forced to work far beyond the recommended 15 hours a week, with 9% of students working 21-30 hours a week and 11% working over 31 hours. Moreover, Unite has outlined that around one-third of students are having to increase their working hours just to stay afloat.

What financial support is available and how can you access it?

On the 11th of January 2023, the government announced that it would provide an additional £15 million in hardship funding this financial year to enable universities to better support students facing financial strain. Likewise, the government outlined that loans and grants supporting undergraduate and postgraduate students will be increased by 2.8% for the 2023/24 academic year, while university tuition fees will remain frozen at £9,250 for the next two years.

In addition to this, the 24 Russell Group universities recently announced a pledge to inject tens of millions more in financial support to help students with the rising cost of living, and match the UKRI uplift to its minimum 2022-23 postgraduate research stipends.

But, what does this mean in real terms? Well, if you’re struggling with finances at university, you may be eligible to access your university’s hardship fund. Eligibility is dependent on a number of factors, which we’ve outlined below:

• You’re a student with children or a single parent,
• You’re a student from a low-income family,
• You’re a student that is a ‘care leaver’,
• You’re a mature student with existing financial commitments ,
• You have a disability,
• You are homeless or living in a foyer.

Find out more about accessibility to hardship funds here.

There are other measures being brought in by universities, and these offerings vary from institution to institution. Durham, for example, is offering students free breakfasts while eligible households at York are being offered help with energy bills. The University of Wales Trinity St David (UWTSD) is offering meal deals for students in the university canteen, for example, soup and a roll for £1, and a food hub offering items for free for students or staff who need help with “no questions asked.”

Alongside hardship funds and student finance, you should check to see whether you’re eligible for other forms of scholarships, bursaries and grants. Scholarships are available to high achievers but are also awarded based on gender, ethnicity, background and disability. In the case of the latter, there is the Disabled Students’ Allowance. You can also get a scholarship for:

• Being vegetarian or vegan via The Vegetarian Charity’s grant,
• Being talented at eSports at the University of Roehampton,
• Studying Welsh through the Coleg Cymraeg Cenedlaethol scholarship.

To read more about the different loans, grants, bursaries and scholarships available, head over here.

Tips for stretching loans and grants

Once you’ve managed to access the grants, loans and scholarships you’re eligible for, you may find that you’re still struggling with your finances, and in this case, below, we’ve outlined some helpful tips to help you stretch your money a little further.

Groceries are undeniably expensive right now, so making savings where you can is helpful. Luckily there are a number of sites that offer either reduced or free food. Both ​​Olio, and Too Good To Go, are good zero-waste apps to check out. Likewise, check to see if there are any food waste supermarkets in your area. You can also check what food banks are available to you locally by searching on the Trussell Trust’s website.

When it comes to planning your week and making sure you keep costs as low as possible, meal plans can be really helpful. This way, when you go out to your food shop, you have a clear idea of what you need to buy and how much it’ll cost, saving you a lot of hassle and money.

Another tip for finding cash when things are tight is to look into selling items that you don’t use or need anymore. Sometimes we can surprise ourselves with the amount of stuff we have that’s just gathering dust. Facebook Marketplace, eBay, Gumtree, Depop, and Vinted are some of the most popular sites for doing this.

It could also be beneficial to look into switching to a better student bank account because there are lots that offer lots of extras, such as free cash and railcards (which definitely can’t hurt if you’ve seen the price of train tickets recently). Money Saving Expert is a good site to check out if you’re looking to compare and contrast. Likewise, using a student bank account often means you’ll have access to a 0% overdraft, and this can act as a buffer when things get tough.

That said, it can be easy to slide into debt when money is tight. With around 27% now using credit cards to help with student life, there’s always a risk of not being able to pay back what you’ve taken out and that can come with a lot of stress. Don’t face this alone. There are a number of debt advice charities out there that can help, including:

• StepChange,
• National Debtline,
• Debt Advice Foundation.

Tags: cost of living crisis, debt, Financial aid, student finance, student loan

Pensions in the current climate

by Madaline Dunn

Recently, there have been lots of government budget announcements and a number of changes made in regard to pensions. These changes come alongside discussions around potential alternations to pensions in the future. With such a raft of changes, it can be difficult to know where you stand or how exactly you’ll be affected.

At The Salary Calculator, we’ll walk you through all the information you need to understand pensions in the current financial climate in a straightforward way. We’ll cover the following:

• The triple lock and discussions around its replacement
• The increase the state pension
• The pension age increase
• Upcoming changes to tax payments for retirees

The triple lock

The triple lock was a pledge made by the Conservatives in their 2019 manifesto but was broken over the pandemic. Now, despite doubts, it has been reinstated under the new budget. It ensures that pensions increase in line with either:

• The average wage increase,
• Inflation, or
• 2.5%

As such, there will be a 10.1% increase in State Pensions from April 2023.

According to experts, the government has considered scrapping it altogether and replacing it with a new system following the next election. Some commentators have also forecast that, in the future, state pension entitlement could eventually become means-tested, a model that is currently present in Australia. A means-tested pension top-up was also proposed by former Chancellor Gordon Brown back in 2002.

This kind of means-tested pension is not without its critics, though, and with recent whisperings of this kind of model being proposed, former Pensions Minister Baroness Ros Altmann claimed it would be “disastrous.” Altmann, for example, outlined: “Without a decent basic state pension underpin for everyone, the real risk is that more pensioners will end up poor in retirement and this will damage long term growth for us all.”

The increase in the state pension

As per the triple lock, pensions will rise in line with September’s Consumer Prices Index (CPI) measure of inflation. So,

From April 2023, payments will be as follows:

• £203.85 a week, up from £185.15 for the full, new flat-rate state pension (for those who reached state pension age after April 2016).
• £156.20 a week, up from £141.85 for the full, old basic state pension (for those who reached state pension age before April 2016).

Increasing the pension age

The UK is currently in a recession, and the Treasury is frantically searching for ways to raise money. One of the proposals that would reportedly raise billions is increasing the pension age. As per current legislation, the retirement age is to rise to 67 by 2028. By 2039, this is set to increase further to 68. However, ministers are pushing to increase the pension age to 68 by up to six years earlier in 2033.

Some experts say that if this goes ahead, those who are currently in their 50s will receive £10,000 less when they retire.

New Work and Pensions Secretary Mel Stride has now confirmed that the outcome of the State Pension age review will be published before May 2023 – so a final decision is coming soon. Stride was recently grilled on potential upcoming changes to pensions in the Spring budget. When asked whether or not the portion of people’s lives spent in retirement should shrink (currently at one-third), he said he couldn’t be drawn on what his thoughts are “at this stage” and questioned whether John Cridland’s (who led a previous review of the state pension age in 2017) was right in his calculation of one-third.

WASPI – Women Against State Pension Inequality, meanwhile, has called for the government to introduce fairer policies. Jane Cowley, director of Waspi, for example, said that the government needs to “look less at average figures” and “take greater account of the lives of people in economically disadvantaged areas.” She added: “Often in these areas there is a drastically lower life expectancy and very few years spent in good health during retirement.”

Likewise, Angela Madden, chair of Waspi, said: “Ministers need to recognise that while we are living longer, people in their late 60s and early 70s tend to be in declining health.” Adding: “It isn’t right to expect everyone to work full-time till they drop.”

Upcoming changes to tax payments for retirees

According to reports, if the UK Government increases State Pensions by 10.1% next April, although 12.5 million people would see a boost, another 500,000 could be included in the “tax net.”

Former Liberal Democrat pensions minister and partner at pensions specialists LCP (Lane Clark & Peacock), Sir Steve Webb, explained that this is because of the freeze on tax thresholds, coupled with the increase in pensions.

Elaborating on this, Nimesh Shah, the chief executive of Blick Rothenberg, on the BBC Money Box podcast, called this a tax increase “by the back door.” He continued: “Everyone uses the word stealth tax increase. They didn’t want to increase the headline rate in the run-up to the next general election.” Shah said that this is an example of the fiscal drag effect: “Someone’s wages go up but they are paying more income tax because of those frozen allowances. The state pension is increasing by 10 percent which is great news but pensions are now going to get dragged into income tax.”

 

Tags: cost of living crisis, pension, pension age, retirement, state pension

The mini-budget and its impact on personal finances

by Madaline Dunn

If the headlines have got you feeling concerned, you’re not alone. It’s been an incredibly difficult few years financially, and the knocks appear to keep coming. The Conservative government’s recent mini-budget has brought in a raft of changes and sent shock waves across markets. However, the implications for personal finances have stretched much further than simply tax cuts, with the pound crashing to a record low, with, what has been called “open revolt” in markets.

At The Salary Calculator, we understand that there is power in knowledge, and the best way to equip yourself for the changes ahead is to be informed. So, below, we’ll explore:

• The changes introduced by the mini-budget,
• How the budget will impact personal finances,
• What the mini-budget means for the value of the pound and living expenses,
• The government U-turn.

The mini-budget

During his emergency Budget speech on Friday, 23 September, the new Chancellor Kwasi Kwarteng introduced the mini-budget which brought in sweeping changes to income tax, National Insurance (NI), Universal Credit, Stamp Duty, and bankers bonuses.

For income tax, from April 2023, the basic rate of income tax will be cut by 1% (from 20% to 19%). Under former Chancellor Rishi Sunak, this was meant to come in the following year. In addition to this, Kwarteng announced that the additional rate of income tax, currently applicable to earnings above $150,000, would also been scrapped, meaning that the highest earners would pay the 40% tax rate on their earnings, rather than 45% (more on that later).

According to the Treasury, these changes will result in 31 million people being better off by an average of £170 per year. However, an analysis from the thinktank The Resolution Foundation at the time of the announcement outlined that “only the very richest households in Britain” would see their incomes grow as a result of the tax changes, with the wealthiest 5% to see their incomes grow by 2% next year (2023/24).

With regards to NI, from 6 November, employers and employees will pay 1.25 percentage points less in NI. This will result in employees paying NI at 12% on earnings between £12,570 and £50,270 and 2% on anything above. Employer rates, on the other hand, will revert to 13.80%.

For those on Universal Credit, in a move that Kwarteng said would “get Britain working again,” rules will get tighter. Set to come into effect in January 2023, the new rules will impact 120,000 claimants, who will be asked to “take active steps” to increase their working hours or find better-paid jobs or have their benefits reduced.

As interest rates on mortgages are projected to reach 6%, the Chancellor has also scrapped Stamp Duty. As a result, you won’t pay any stamp duty on the first £250,000 of a property. The Treasury has outlined that 200,000 more people every year will be able to buy a home without paying any stamp duty; first-time buyers will now pay no stamp duty up to £425,000 (up from £300,000). Some have voiced concerns that this will lead to further hikes in house prices, much like when Sunak announced the Stamp Duty holiday.

In a surprising move the Chancellor has also made strides toward deregulation of London’s financial industry to “boost growth.” This has come, in part, in the form of Kwarteng scrapping the banker bonus cap. Explaining this decision, the Chancellor said: “We need global banks to create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt and not in New York.” Unite, on the other hand, called the move an “insult to workers,” while Positive Money, a non-profit research and campaigning organisation, called it “shameful.”

The value of the pound and its effect on day-to-day living expenses

The currency markets have reacted to Kwarteng’s mini-budget with volatility, and subsequently, the pound has plummeted. At a record low, on Monday, 26 September, the pound was worth $1.0327 against the dollar. The pound also dropped sharply when the Bank of England was forced to intervene over what was being called a “material risk” to the UK economy.

But what does this mean for consumers? Well, unfortunately, it’s not good. With the pound so weak against competing currencies, the price of imports will be much higher. This is especially bad news considering that when it comes to food self-sufficiency, overall, the UK imports more than 50% of its food, with supermarkets specifically relying on imports for 40% of their food stock, meaning that the price of groceries is set to increase yet again. Moreover, regarding travelling via car, according to the AA, a weak pound means that filling up a family car could cost an extra £7.50, and that’s not taking into consideration the fact the fuel prices are already at an all-time high.

The struggling pound will also have a staggering impact on mortgages. On Monday, the financial markets forecast that the base rate could nearly treble to 6% next year. Likewise, those on variable rates (2.2 million) will immediately feel the effect of raised interest rates.

The 45p rate U-turn

In the wake of serious backlash over plans to scrap the 45p rate for those earning over £150,000 a year during a time of rising living costs, the government has announced a U-turn. This U-turn also comes following the circulation of reports that new Chancellor Kwasi Kwarteng met with hedge fund managers for a champagne reception just after his mini-Budget.

In terms of what the U-turn means for the pound, those from the financial sector have warned that while sterling has performed better, a lot of questions still remain, considering that the 45 pence tax rate was only a small part of the unfunded tax cuts announced. As Jane Foley, head of FX Strategy, Rabobank, London, said: “UK assets, the pound and gilts are not out of the woods yet, and the British government has a lot to do to get back credibility.”

Moreover, while the U-turn seemed to bolster the pound, with sterling jumping as much as 1pc in early trading amid reports, it fell back to around $1.12 following the Chancellor stating he wouldn’t resign.

Tags: Consumer goods, cost of living, income tax, mini-budget, national insurance

The Winter Fuel Payments

by Madaline Dunn

There’s no denying that times are hard right now. On top of this, the winter months can be the most difficult time of the year, with much higher energy demands.

Fuel Poverty Action, a grassroots campaign striving to bring an end to fuel poverty, has even warned Prime Minister Liz Truss that tens of thousands will be at risk of death without serious intervention around the cost of living crisis. The campaign organisation has specifically called for a basic level of energy for every household, enough for people to maintain enough heating, lighting, cooking, and other essential services.

The government is yet to introduce this kind of scheme but has brought in a number of other financial aid schemes.

One of these schemes is Winter Fuel Payments, an initiative that was brought in back in the late nineties but has received a boost in response to the crisis. At The Salary Calculator, we’ll explore:

• What the Winter Fuel Payments are, and who is eligible,
• How much you receive and when you will receive the payments,
• How the payment will be issued,
• Whether there is additional help out there to help with the cost of living.

What are Winter Fuel Payments and who is eligible?

The Winter Fuel Payments were launched back in 1997 and were introduced in order to assist older people with fuel payments in the colder months. However, in order to be eligible for this financial assistance,  there are a number of conditions that must be met:

• You must have been born on or before September 25, 1956.
• You have to have lived in the UK for at least one day during the week of September 19 to 25, 2022.

That said, if you can not meet the second condition and did not live in the UK during the qualifying week, you could still be eligible if you can fulfil the following criteria:

• You live in Switzerland or a European Economic Area (EEA) country,
• You have a “genuine and sufficient link to the UK” (this includes having lived or worked in the UK previously or having family in the UK.

You will not be eligible, however, if any of the following applies:

• You are in hospital and have been receiving free treatment for over a year,
• You require permission to enter the UK,
• You were in prison for the whole week of September 19 to 25, 2022
• You lived in a care home between June 27 and September 25, 2022, and received certain benefits.

How much will you receive and when will you receive the payments?

When it comes to Winter Fuel Payments, you could receive between £250 – £600 to help pay your heating bills, and the amount you will receive is dependent on a number of factors, including:

• How old you are,
• Whether you live alone,
• What benefits you receive.

This year, the amount you will receive includes a Pensioner Cost of Living Payment worth between £150-£300. The amount you receive will be tax-free and paid in addition to any other Cost of Living payments. These payments will also not affect the other benefits that you’re eligible for.

How will the payment be issued?

According to the government, while most payments will be issued in November or December, pensioners should be paid by January 13, 2023. Government advice is for recipients to check their account between November and December to review whether or not they have been paid.

Although the process should take place automatically, if you have not received a payment and you are eligible, directly contact the Winter Fuel Payment centre to report the issue.

For more information about the payment scheme, head over to the Gov.uk website.

Is there other help out there?

Although this particular initiative only applies to older adults in the UK, there are further initiatives for people struggling with the cost of living crisis. This includes:

• The Energy Bills Support Scheme: A non-repayable government discount of £400 made in six instalments from October 2022 to March 2023 (£66 in October and November and £67 in December, January, February and March.
• The Warm Home Discount Scheme: A £150 discount on energy bills for those receiving certain benefits.
• Fuel vouchers: For those on prepayment metres.

For more help and advice around the cost of living crisis, visit the Citizens Advice website.

Tags: cost of living, Economy, Financial aid, Pensions, Winter Fuel Payments

The National Insurance threshold increase and what it means for you

by Madaline Dunn

In the midst of numerous cost of living hikes, it’ll likely be comforting to learn that as of 6th July, millions of people will be slightly better off as a result of the National Insurance (NI) threshold increase.

At The Salary Calculator, we’ll walk you through:

• How much the threshold has been increased by
• Why the threshold increase is happening
• How this will affect people
• How to check what difference it will make to your take home

How much has the threshold increased by?

From 6th July 2022, the threshold for National Insurance contributions increased from £9,880 to £12,570. This means that people will now have to earn additional £2,690 before paying towards National Insurance.

Why has the threshold been increased

Back in April, the government announced that despite the cost of living crisis continuing to worsen, NI would be increasing by an additional 1.25% in an effort to aid NHS recovery, and fund the Government’s share of social care. However, the government has now raised the NI threshold as part of what it’s called the Chancellor’s “wider vision for a lower tax economy.”

How will this affect people?

This threshold increase means that some people will see a boost in their July pay packets. Experts have outlined that those earning around £31,500, or less will notice the most significant difference. Moreover, the UK government has said that almost 30 million working people will benefit overall, with the average worker saving over £330 in the year from July.

According to a previous statement by the government, 70% of NI paying workers will pay less, and 2.2 million people will no longer be required to pay NICs as a result. According to figures by HW Fisher, those earning £14,000, will save around £342.37 a year, meanwhile those on £20,000 will see savings of £267.36.

A more in depth comparison of how the situation has fluctuated in recent months shows that someone earning £20,000 would have been faced with a monthly NI payment of around £104 before April. This then rose to £112 following the hike and now, as a result of the July changes, will drop to approximately £82.

That said, while any money saved is arguably a win, it’s important to put the savings into a broader context, Alice Haine, personal finance analyst at investment platform Bestinvest, for example, has noted that the £330 workers will save, “won’t stretch far when you realise that only equates to £27.50 a month”.

While Haine outlined that for some, £27.50 could be the difference between “having dinner every night and sometimes going without,” for many it will “barely make a dent in their budgets as they struggle to pay the household bills amid rampant inflation as soaring food, fuel and energy prices become the norm.”

Stevie Heafford, tax partner at accountancy firm HW Fisher, echoed similar sentiments and when asked if it will help to solve the current crisis, he said: “The very short answer is, no. Those with lower income will save more in pure monetary terms, but they will be more exposed to the general increases in cost of living as they are less likely to have any sort of ‘buffer’.”

How can you check what difference it will make?

You can review how much of a difference this will make to your take home pay by heading over to The Salary Calculator, where you will be able to figure out exactly how much you’ll save.

Tags: cost of living, Economy, national insurance, NI threshold, take-home pay