MSE News: Guest comment: How banking bonuses have hit student loan repayments

Credit-Crunched

James_B. wrote: »

I suppose that at least this one did not outright allege criminality of all bankers based on the purported crimes of one in a thousand.

For some reason a "banker" earning £500k seems to be expected to pay more tax than a lawyer on the same amount (and, given the bonus tax, has actually had to do so in recent years), despite virtually no-one outside the sector being quite sure what the people in those towers in the city actually do.

Plus a complete blind eye turned to Head Teachers 'earning' £170k a year, heads of social housing departments £250k, and a whole other range of quanqo and honey pot public sector jobs being bank rolled by the public purse.

kathrynha

Credit-Crunched wrote: »

I did read the article and the premise is that deferral of bankers bonuses skewed the figures

This rate kicks in on annual income over £150,000 and many City workers had their bonuses delayed to benefit from the tax change, which artificially inflated the ASHE data

But that says "city workers", which includes many non-bankers

ericctheking

The bankers did nothing wrong they just followed the rules and regulations to benefit themselves.
I put this out there.
How about ex students doing the same?
It might not be moral but it is legal.
Was it moral of the government to sell these loans and put debt collectors with semi -legal tactics on to ex-students?
Think how student loans are sold;
"don't worry it isn't a normal loan it is with the government"
"It won't effect your ability to get credit or a mortgage in the future as they don't go on credit records"
etc....etc....
Now maybe ex-students where foolish in not reading the terms and conditions to the letter (although isn't that miss-selling when the terms and conditions aren't explained sufficiently?)
But the conditions have a huge loophole in them where ex-students can move income to different months of the year to be always under the threshold even if they are billionaires!
Why not use this?
It would be interesting to hear a bankers opinion!!!

Ed-1

MSE_Helen wrote: »

Freelance higher education writer Andrew McGettigan explains how banking bonuses have affected the new deferment rate...

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Guest comment: How banking bonuses have hit student loan repayments




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http://forums.moneysavingexpert.com/showthread.php?p=66425189&highlight=#post66425189

Old news

anna2007

The same thing happened back in 2010, but effectively in reverse, when the higher rate of tax increased from 45p to 50p, bonuses were paid early to avoid the higher rate. The effect on the deferment level was around a £500 drop in the annual amount for 2010, but the upshot of that was the 2009 level was artificially high (as the early bonuses skewed average earnings). Obviously some graduates would have benefited, able to defer when their earnings were above the true average earnings figure, so it's not always to the borrower's detriment.

Although I agree that common sense should have prevailed and these anomalies adjusted for in the past, I think it would be dangerous for changes to be made to the calculations, now that the loans are in the hands of private sector debt collectors.

Although not ideal, at least it's consistent, and the skewed deferment level rights itself in the following year?

Ed-1

anna2007 wrote: »

The same thing happened back in 2010, but effectively in reverse, when the higher rate of tax increased from 45p to 50p, bonuses were paid early to avoid the higher rate. The effect on the deferment level was around a £500 drop in the annual amount for 2010, but the upshot of that was the 2009 level was artificially high (as the early bonuses skewed average earnings). Obviously some graduates would have benefited, able to defer when their earnings were above the true average earnings figure, so it's not always to the borrower's detriment.

Although I agree that common sense should have prevailed and these anomalies adjusted for in the past, I think it would be dangerous for changes to be made to the calculations, now that the loans are in the hands of private sector debt collectors.

Although not ideal, at least it's consistent, and the skewed deferment level rights itself in the following year?

Agreed. Delayed bonuses will only distort the threshold by a few thousand either way and while not ideal, it's not as if it's lowering it to a level where the vast majority of borrowers are dragged into repayment one year because the threshold's so low and then no borrowers are repaying the following year because the threshold's so high which would be farcical.

Credit-Crunched

kathrynha wrote: »

But that says "city workers", which includes many non-bankers

Which contradicts the attention seeking headline

"How banking bonuses have hit student loan repayments"

PeacefulWaters

1) The headline is tacky and MSE's rush to the bottom when it comes to journalistic presentation continues.

2) It's a swings and roundabouts situation that will even itself out.

spikyone

Quite honestly, how many people is this going to affect?


Let's assume that the affected people started University in 1997, the last year that the old style loans were in place. And assume also that they studied a 4-year Masters' degree, with a placement year. They finished university, then, in 2002. I know there will be exceptions but in the most part they will likely be doctors, architects, etc. whose qualifications took longer, and they will be earning far more than £27k by now.


If the loan is paid off over 5 years, then anyone who is still earning below the threshold has been doing so for at least 7 years. They've either taken themselves out of full-time employment (e.g. becoming a full time parent, who won't be affected), or are in work and exhibiting a staggering lack of ambition - they're earning less than the average UK wage, 12 years after graduating.


Let's also add that tuition was free pre-1997, so loans were only to cover the cost of living and were certainly less than £2k/year. Assuming that ex-students owe £10k (unlikely), they need only find £166 per month, on a salary of £26,727. As a ball-park figure, that's under 10% of their post-tax/NI/pension income.


This must rank as one of the biggest non-stories MSE has ever covered, and as others have said, the headline seems like a rather pointless slice of banker-bashing.

spikyone

And just to add, the only people affected are those in a very narrow salary band - £26700 to £28700, give or take. What are we talking here? A couple of hundred people at the very most?