Home Accountant Accounting compensation: the student loan limit teaches a hard lesson

Accounting compensation: the student loan limit teaches a hard lesson


Critics of the UK government’s plans to reorganize student loans have naturally focused on nurses and other essential workers. But many junior accountants would also find themselves in a worse situation, in a context of stagnant starting salaries.

A government proposal to lower the reimbursement threshold to £ 23,000 would let ordinary accountants pay more over the course of their careers. Elite peers – alongside lawyers and investment bankers – could expect to pay off their debts faster and more cheaply.

For all students except the richest, higher education costs in the UK are covered by a tax-backed loan scheme. Borrowers only start repaying principal and accrued interest when their income exceeds £ 27,295, at a rate of 9% on excess. Debts are written off after 30 years.

The big four firms Deloitte, PwC, EY and KPMG are shy about wages. But starting salaries for graduates at larger companies have fallen in real terms over the past decade, according to High Fliers, a graduate recruitment researcher. In 2011, the median was £ 26,000. With inflation it should have hit £ 32,400 last year. Instead, graduates from 2022 can expect around £ 30,600.

The starting salary in law and consulting is 50 percent higher and has kept pace with inflation. This is in part the result of fiercer competition. Consultants McKinsey, Bain and BCG compete for a small number of top graduates. Magic Circle law firms have been forced to improve their offering by an incursion of American rivals.

In contrast, accounting firms and the public sector aspire 10,000 graduates per year. Once qualified, accountants can earn as much as freshman bankers, according to data from recruiter Hays. Step up to become a PwC partner and they could win £ 868,000. But the average salary is well below around £ 63,715, according to 2019 figures from industry body ICAEW.

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Bright future accountants will easily model the impact of a lowered loan repayment threshold on a range of lifetime income. Their spreadsheets will point out that the higher their future salary, the better the return on their education. A career as a consultant on capital projects will beckon you.

The Lex team wants to know more about the readers. Please tell us what you think about accounting compensation in the comments section below.

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