Brian Palmer, tax policy adviser, AAT (Association of Accounting Technicians)
A survey from the Halifax bank, issued this morning, has shown that children aged between 8-15 think they will earn ‘only’ £1.5 million a year and want to retire at age 56. Sadly for them, if current inflation rates and pension trends are anything to go by, they will be very mistaken in both camps.
AAT has carried out analysis on ONS data which has shown that, over the past ten years, wages have risen at a fairly steady rate with the average annual gross salary in 2017 up £5,553.60 from 2007, a 24% increase. Possibly surprisingly the rise, from £23,067.20 to £28,620.80, means that wages have risen slightly faster than the 2% inflation target that the Bank of England’s Monetary Policy Committee has worked towards since 2003.
Assuming the same rate of inflation continues, the average full-time gross salary will hit £54,701.23 by 2047, when the children surveyed by Halifax reach will be aged between 37 and 44, and continue to rise to £84,244.33 in fifty years time, when the same children’s ages will range between 57-64 and over the age at which they will have otherwise hoped to retire.
|Year||Median gross earnings for UK full-time worker||Ten-year percentage rise|
With the current state pension age reaching 68, and set only to increase giving higher life expectations, an ageing population, and pressures on public health budgets, it will likely be the case that today’s children will have to work harder than ever for the income that they do receive to last throughout their lives.
AAT recently called for a major shake-up of the ISA system, encouraging the value of straightforward saving into one simplified vehicle, in order to help with this process.