Wednesday 24th July 2024

Must-know money: Student debt surpasses £200bn for first time

high student debt

From peak levels of student debt to energy saving and retirement pension – here are our favourite must know money stories this week to help you get your head around your personal finances.

Student debt surpasses £200bn for first time

Outstanding student debt in England has surpassed £200bn for the first time, reports Richard Adams for The Guardian.

This figure has doubles in just six years, 20 years earlier than previous government forecasts, as the number of students at universities continues to outstrip expectations. Student loans crossed the £100bn mark in 2016-17 after the coalition government increased undergraduate tuition fees from £3,600 a year to £9,000 in 2012.

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The Student Loan Company revealed that England graduates now owe an average debt just under £45,000, in contrast to students in Scotland, Wales and Northern Ireland who owe lower amounts.

More recent forecasts by the House of Commons library predict the total will reach £460bn by the mid-2040s.

With student finance already expected to be a battleground in next year’s election, Labour, if elected, has pledged to reverse changes made by the government accusing them of “hammering the next generation of nurses, teachers and social workers.”

Energy saving to return to prevent winter blackouts

Discount offers for households to use less electricity at peak times will return this winter as part of plans to minimise the risk of power cuts, reports Michael Race for BBC News.

National Grid ESO said it is taking steps to “minimise the potential impact to electricity customers” in the UK if supplies were to be disrupted again during the winter. While it is expected to have sufficient capacity to meet demand, it says it would be “prudent” to maintain the energy-saving scheme.

A typical property will have to pay £2,074 a year for gas and electricity from July, far above the £1,277 average bill in winter 2021.

National Grid ESO said the Ukraine war posed risks and uncertainties to gas supplies across Europe, and the “tight days” on the UK energy grid would most likely be in January. “There will be cold snaps in the winter and therefore we do expect to use our normal operational tools,” said a spokesman for National Grid ESO.

The amount of energy saved during the scheme last winter was enough to power almost 10 million homes, but the amount earned by each household is still to be known.

How much pension do I need for retirement?

As a general rule of thumb, people tend to retire on two-thirds of their annual salary, writes Nicole Garcia Merida for MoneyWeek.

While everyone might have a different ‘right’ amount for retirement – as per this rule, with an average salary of £33,000, the earner is placed between the Pensions and Lifetime Savings Association’s (PLSA) moderate and minimum categories.

A report by Now: Pensions and the Pensions Policy Institute found that ‘underpensioned’ groups, have private pension incomes 18-64% lower than the average UK person, reaching retirement with as low as £2,850. These groups primarily include single mothers, the self-employed, carers, people with disabilities, and ethnic minorities.

Merida looks at the below steps to plan your retirement better:

  1. Sit down and crunch numbers
  2. Boost your pension when you get a pay rise
  3. Keep track of old pension pots
  4. The longer you invest for, the more compound interest you will benefit from

You can save better for your retirement outside a pension by investing with ISAs, property and maintaining a long-term focused investment portfolio.

Photo credits: Pexels

Richa Ved

Richa is a young Indian graduate from Warwick Business School, aspiring to find her niche in the media industry. She has a passion for writing and a keen interest in financial affairs. If you don’t find her working, she’s probably having a pizza (her favourite!) and a pint of beer somewhere.

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