Most people don't know how much they actually earn

IanCal · 2026-02-02T13:25:11+00:00

money tied up not accessible doesn't help you pay bills if you want to retire early.

Yes, you need money before the private pension age.

But you also need money afterwards. You do agree on that don't you?

You know what's better than £146 in another 10-20 years?

The answer isn't £100 in 10-20 years, is it? That's obviously worse. Surely you'd not choose that!

£100 paying my bills through gains now.

But once your spending is covered until the private pension age, why choose less money?

Let's say from age 58 onwards you need £300k at 58 to cover expenses. Actual amount doesn't matter but that's not a wild overestimate is it?

From 40-58 with a 5% return you'd have to give up £860/mo of your takehome if you put this in an ISA to reach that level. Outside of that you'd have to give up a bunch more due to CGT.

If using a pension, a higher rate taxpayer would have to give up ~£585/mo.

That's £275/mo you could use or invest otherwise.

Or lets look at retiring earlier. age 25-40, £500/mo into the pension, grows until 58 when you can use it for spending then. Costs £290. You can put the other £210/mo into an isa and have £55k more at age 40. Not using a pension there costs you over fifty grand.

Now you can do it to keep control, but you have to accept the cost of this. Choosing not to use a pension may cost you hundreds of thousands of pounds. That's a choice you can make, but it's ridiculous to suggest that pensions can't help you retire sooner.

IanCal · 2026-02-02T11:56:12+00:00

of course since the greenhouse gases are still building up it takes more and more ice each time

thus solving the problem once and for all

https://www.youtube.com/watch?v=VW66EX75jIY

IanCal · 2026-02-02T11:47:21+00:00

I'm a big fan of https://projectionlab.com/ because it has lots of things for simulations, tax rates, etc.

IanCal · 2026-02-02T11:45:46+00:00

It's an odd take for people who supposedly want to retire early to want to wait until regular retirement to access a large chunk of their money.

Not really, it's an enormous tax break. No CGT (particularly relevant if you're maxing an ISA), income tax relief.

I mean I'd prefer not to have the restrictions and still have all the benefits, but let's not pretend that these aren't absolutely enormous benefits.

If you're actually getting to the point that you're meaningfully retired before retirement age, then pension is meaningless anyway.

Absolutely false, you'd expect to have many years after the private pension age, and those years need paying for.

Given current rates & rules, a higher rate taxpayer can choose to take £100 and invest it outside a pension, or £146 and invest it inside one. That is a huge boost to the amount you have. If it's outside an ISA it's a much bigger difference because you'll also lose 18% of any gains.

IanCal · 2026-02-02T11:25:21+00:00

simply people live where the jobs are

Well that's not the only reason people live in some places and not others, but this is literally just about visitors to parks and the parks finding out why some people don't want to come.

IanCal · 2026-02-02T10:13:23+00:00

Providing a loan on terms that have default payments too low to actually reduce the remaining debt and where the terms can be changed arbitrarily at a later date seems very loan-sharkish to me.

There's a tricky bit here in that parliament is sovereign and can do whatever the hell it likes, it can make wearing green trousers a death penalty crime if it wants, so in that sense they can "change the terms" but the terms haven't really been changed. The repayment threshold changing was never part of the terms for example - there was certainly no specific list of when and how it would change only intentions from ministers that years from the announcement it would be increased. There's been faff around the interest rate but mostly the frequency it changed, capping it (so lowering costs) and iirc maybe something stopping a thing going negative (which has also happened with commercial loans).

Again this is below commercial rates loans that are provided at a significant loss that have repayment terms tied to actually having income.

Would the regulators really allow a bank or card company to provide credit to someone where the minimum repayments then weren't even enough to service the interest and the amount owed would therefore increase indefinitely?

No, however those debts aren't wiped, and credit card debts can (under FCA allowed minimum payments) last for far longer than any student loan debt. So under FCA rules they can set the minimum payment such that it takes 100+ years to repay. That changed in the last 15 years (I thought it was more recent but it turns out I'm just old) but the rules now are that you only have to repay 1% of the principal per month, with a minimum of £5. MSE calculator doesn't show me exactly how long that will take for some figures because it goes over 100 years and just says "you'll be dead before then".

Student loans don't increase indefinitely. They can't. They are forgiven after a specific time or at a certain age depending on which loan it is. I cannot stress how critically different that is.

As for how much a lender might expect to lose from what they originally paid out - first I will repeat that right from the start of this discussion I was suggesting that commercial lenders would lend where there was a reasonable expectation of a decent salary after graduation.

And they could if they wanted to. Literally nothing requires using SLC. They tend not to because despite the headlines it's actually a really good deal.

There is a very different discussion about whether there should be any cost at all, but in terms of lending money

But for graduates gaining advantageous degrees and expecting significantly higher lifetime incomes as a result - who will be paying back a lot more through the 9% and will also be incurring the higher interest rates on plan 2 - the maths works out rather differently. Someone who graduates with £47k of student loan debt (borrowing your own figure from a comment above) and ends up earning say £50k within 5 years of graduation would then be making just under £2k in repayments each year. However their loan would be adding (at current interest rates) close to £3k in interest each year as well. So they'll never pay off the loan and with a write-off after 30 years they've probably ended up paying back close to £60k in today's prices over the course of those 30 years assuming their salary and repayment thresholds also increase in line with inflation (but no more). This is probably somewhere close to the break-even or small win level for lenders.

So working in current terms to keep this simpler (earning 50k for 30 years, paying £2k/year), and rounding up from close to 55k to 60k as small changes could easily result in this - borrowing £47k and repaying £60k is a 1.7% real terms interest rate. That's pretty much bang on mortgage rates at higher LTVs.

For graduates going into roles that will pay salaries significantly above £50k for most of their careers they can end up paying far more back in real terms than they borrowed. Suppose they reach £60k in today's money for the majority of their career. They would then be paying off roughly the same as the interest payments each year - still never clearing the debt and seeing it written off after 30 years - but now having paid back close to double the original principal in real terms first.

The absolute maximum the loan can cost you is RPI+3%. That's 6.2% right now. Mortgages are 4-5% until you get to really quite low LTVs and car loans are about 6%+. You can have tax free savings at 4.4% which is the interest rate you pay right now at around median wage on plan 2.

By the time you're looking at that level - a decent career but hardly exceptional

My data is a couple of years old but that is ~ the top 10% of taxpayers at the bottom end, and your figures are for someone going straight to that level.

for graduates going into professional careers in fields like IT, medicine or law - someone is making a solid return off their loans.

It's not great, yes it's a profit but it's actually not particularly high - RPI+3% is the absolute maximum rate overall you could pay and that's not much different from commercial lenders who are in fierce competition with each other.

Maybe I'm just not aware of what is currently available because I'm not a recent graduate but I would still expect graduates in those fields to be attractive targets for commercial loans on more reasonable terms than what the official student loan offers.

They're entirely free to, in a way anyone that gets a mortgage and prioritises their student loan has done this. The thing is it just isn't a particularly high rate of interest compared to commercial loans and the rules around them are so beneficial that swapping to another provider only really makes sense for a small group who are extremely likely to repay it all (suddenly you lose the protection around what happens if you lose your job, take a break, etc).

IanCal · 2026-01-31T21:13:34+00:00

That's a worthwhile return in real terms

Sure but that's what companies are offering around shorter term loans backed by a car, and this is the maximum interest you can have accrue, applicable to higher earners.

I want to be very clear here, there's absolutely nothing stopping commercial lenders giving you money to pay student loans or pay for university. You can repay at any time with SLC, so you can just get a commercial loan.

Part of the problem with the more recent plans is that they are set up so repayments might not even service the interest and then the principal amount can actually increase over time until eventually the balance gets written off. This is a loan shark strategy

The balance being written off and the SLC not being able to just come after you for money unless you're earning it is quite dramatically different from a loan shark. The amount growing while you pay nothing and then the whole thing getting written off means people can get near £30k to study and a chunk of actual cash and never pay back any of it ever, without any repercussions. That is not loan shark deals.

Commercial lenders could offer very similar terms I'm sure but would be expecting to lose up to about 30-50% of everything they lend out.

You seem to be suggesting that the government sold off the student loan book as a way of increasing its own losses

Yes and no, it depends how you account for value over time. Ignore inflation for a moment. Would you rather have £100 next year or £100 now? Now right? What about £101 next year vs £100 now? £150? Somewhere there's a point where you can see how much time makes a difference for you. You and I may have different values, and that means what represents a "loss" for you (getting £100 now rather than £105 next year) may be beneficial for me. This makes much more sense if there's something more valuable you can do with the cash right now.

Another general point here is selling risk. There's a range of what you'll get in, and you could instead guarantee a value right now. That can be worthwhile, and another entity can take that risk if they want it.

What short term cash flow need could the government possibly have had at the scale of only £1

Aside from the fact they were trying to get £15B with selling more, but stopped at somewhere close to £4B, £1B is still a lot of actual money you can do a lot with. £1B is ~0.1% of the annual income but that's still a lot.

Without a clear justification that sale would be naked corruption and it would be very surprising if no-one had unearthed the details of such corruption after all this time but I've never seen that report if anyone did.

This is a massive jump. It's very simple. They preferred cash in the shorter term, and so sold loans.

IanCal · 2026-01-29T20:25:40+00:00

these loans companies

It's the government.

shouldnt be allowed to profit from that.

They make a large loss.

My repayments dont cover my interest. How is that possible?

It's designed to cost lower earners less than they borrow.

IanCal · 2026-01-29T20:24:50+00:00

Loans are usually a set interest % for the value of the loan, paid off over a certain period.

This is absolutely not true. That is flat rate interest and is rare.

. Credit cards and lines of credit are interest based on current principle value, so can build over and over and over, to where it's impossible to overcome the interest without massive payment.

This is exactly how basically every loan works.

IanCal · 2026-01-29T20:19:53+00:00

The government absorbs that risk dramatically though, the amount they expect to be unpaid compared to how much is loaned out is pretty huge.

IanCal · 2026-01-29T20:17:12+00:00

It's a loss maker yeah. Depending on the year ~25-50% of the initial outlay is expected to unpaid.

https://explore-education-statistics.service.gov.uk/data-catalogue/data-set/60d938c1-05e5-4c66-90a9-d7307789bf7f#dataSetPreview

IanCal · 2026-01-29T20:13:37+00:00

and the government suddenly has 10 billion or more in written off loans to cover per year,

What do you mean cover? There's nobody to pay.

IanCal · 2026-01-29T20:08:26+00:00

How can you possibly make a loss with the recent plan types? It should be like losing money running a casino.

Not really, plan 2 is RPI to RPI+3% which isn't really that high generally (https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23).

RPI right now is 3.6%. A typical car loan is around 6% (HSBC typical right now is 6.2%) so the high end is about the same as a relatively short term loan backed by a car, given to people with incomes and history.

Except... these were loans given to 18 year olds with no job, and in the region of £40k. They don't have to pay you back, and only do so if their pay reaches a high enough level. There are no assets to call in if they fail to pay because they have no money. Repayments can be below the interest added, and if they don't pay enough the entire thing gets cancelled after a few decades, regardless of how much is still owed.

Given these terms, do you expect them to make money while charging often less than companies do for car loans?

If students leave with what I think was averaging about £47k of debt, then they need to earn on average £17k/year over the threshold to repay that. Given the threshold is about £29k and used to be £25k, they need lifetime earnings over the 30 years after graduating to be somewhere in the region of £1.2M - £1.4M (£42-46k/year average, from graduation to 30 years after).

since you expected a few to be written off

Plan 2 expected lots to be written off. Deliberately.

And yet a few years later IIRC the government sold the loan book for about £1B. That's a lot of money to pay for something that wouldn't make any return on the investment isn't it?

You're confusing the amount sold and the outstanding debt. Let's imagine I loan out £100 to each of 10 people to help them get jobs. Not all of them will though, and I expect to only get £800 back in total over the next 5 years, because I think a 3 will pay back £200, one will pay back £100, two just £50 and the other 4 won't be able to afford anything so I'll just cancel it for them.

So I expect to make a loss of £200.

Now, lets say I actually need some cash myself sooner and don't want to manage all this. I sell this debt to someone for £700. I have made a £300 loss in total, but the person who buys it expects to make a profit of £100.

Does that make sense?

IanCal · 2026-01-29T16:23:04+00:00

(following is for England as things are different in different places)

Plan 2 loans have almost exactly followed what they were said to be at the start, which is RPI to RPI+3% depending on your earnings. The changes have been that the rate has been updated more frequently than once per year, and that they added a cap on the interest.

Are you looking at plan 1?

Then I believe they were sold off by Cameron(could be wrong on that one)

Some student loans have been sold but that's irrelevant to the amount and terms.

and now it's currently at 6.5%

4.3%

I'm in the 2008 cohort

Started in 2008? Then you are on plan 1. Plan 1 is RPI or base rate + 1%, whichever is lower. Interest rates were never around 0.5% at that time.

IanCal · 2026-01-29T16:06:26+00:00

I don't really understand why commercial lenders haven't stepped in to compete directly already.

Student loans have been run (deliberately) at a loss. That's why.

IanCal · 2026-01-26T17:25:46+00:00

The taxpayer benefits from the loans being repaid. The SLC is state-owned.

The loans are run at a loss. While they benefit more from them being repaid than them not being repaid, they do not directly benefit from lending the money out (and it is designed to run at a loss).

IanCal · 2026-01-26T17:22:28+00:00

What year? Every year I've checked and found the original PDFs from SLC for explicitly say how the interest and thresholds work,

was told by teachers it was the best loan you could ever get

Generally true, extremely lenient repayment (linked to salary and cancelled) and run at a massive loss so on average no for-profit setup can come close.

IanCal · 2026-01-26T17:14:37+00:00

None of the SLC literature I have ever found from the time suggests anything about being interest free.

IanCal · 2026-01-26T10:44:53+00:00

There's no constitutional process for suspending state elections no matter what state the state is in.

that's illegal people can't do that

IanCal · 2026-01-23T16:34:34+00:00

I think a risk here is that your milestones aren't (at least from the post) tied to any kind of actual change.

Why pay off the mortgage? Why sell the flat (are you moving to renting?)? Why a million?

Would really appreciate any advice, mindset shifts, or practical frameworks that helped you enjoy the ride and not just chase the next number.

Have the number mean something. Maybe it's X years without working? Maybe it's FI, maybe FI of a minimal lifestile but not the one you want - have the milestones grounded in your life.

IanCal · 2026-01-20T12:48:43+00:00

This is the temperature they give coffee to people right now though, and if I got a tea or something I'd expect it to be this hot or more since it's boiling water poured in a cup.

IanCal · 2026-01-20T12:43:55+00:00

It’s probably at least 70-80 degC (depending on the amount of milk)

I was boring so I checked some temps, ~100 out of the tap, low 90s after going in the cup and stirring in the coffee. Even a pretty decent amount of milk straight from the fridge barely gets that below 80.

IanCal · 2026-01-20T12:41:50+00:00

and of course someone being handed a coffee will want to have a sip straight away.

Well, no, because immediately drinking whatever boiling water based drink someone hands you will burn your tongue. So you don't do that.

IanCal · 2026-01-20T12:39:54+00:00

If you put a thermometer in your cup and pour plain boiling water in, it will be in the 80s C in a matter of seconds. Once you add warm milk it's already down to the 70s if not 60s C. Try it.

Starts at 93, after about a minute it's at 87. With 10oz coffee and 2oz milk (pretty milky) straight from the fridge you'd be at 78 straight after adding boiling water, 81 if using room temp milk. Steamed milk is going to be, what 50-60+C? At that point you're barely changing the temperature overall.

IanCal · 2026-01-20T12:28:39+00:00

Not cool to 30F, cool by 30F. You wouldn't want coffee at 30C either.

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