The graduate game is rigged (UK): your first pay packet, student loan, pension and first home

The short answer: In 2026/27, a graduate on £33,000 pays 20% Income Tax above £12,570, 8% National Insurance, and 9% of pay above £29,385 (Plan 2) or £25,000 (Plan 5) towards a student loan. Your employer must usually enrol you in a pension too. It's harder to get hired than it used to be, and that isn't your fault.

You got the grades and the degree. So why does it feel like you're losing? This guide isn't here to make you feel worse (the news does that fine on its own). It's the honest money chat nobody had with you, with this tax year's figures.

Why is it so hard to get a graduate job right now?

Because there are more applicants than ever for each job. The Institute of Student Employers (ISE) found more than 1.2 million applications for just under 17,000 graduate vacancies. That's 140 applications per job, the highest since it started tracking in 1991.

It hasn't eased since. In the ISE's 2025 survey, graduate vacancies fell 8% while apprentice vacancies rose 8%. Back in 2002/3, employers got 38 applications per graduate job. Now it's 140.

AI may be part of it. Entry-level jobs have fallen by nearly a third since ChatGPT launched, according to Adzuna figures quoted by recruiter Morson.

So if you've sent 50 applications from your childhood bedroom, nothing went wrong with you. A few things that tend to help:

• Use your network. StandOut CV's round-up cites a survey where 39% of British workers found their job through people they know.

• Treat your first job as a starting point. It needs to teach you something, not last forever.

• Look past the salary. Holiday, training and employer pension payments all count. Our guide to the money stuff to check before you accept a job offer walks through it.

What comes out of my first graduate pay packet?

Four things usually come off before your pay lands. Here's how each works in 2026/27 in England, Wales and Northern Ireland.

• Income Tax. You get a £12,570 Personal Allowance tax-free. You pay 20% on income from £12,571 to £50,270, and 40% above that. Rates are different in Scotland.

• National Insurance. Employees pay 8% on pay between £1,048 and £4,189 a month, and 2% above that.

• Pension. Most workplace schemes take a share of your pay between £6,240 and £50,270 a year. More on this below.

• Student loan. 9% of everything you earn above your plan's threshold.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

Example: a £33,000 first salary, worked through

£33,000 is the average graduate salary in the ISE's 2025 data, so let's use it. That's £2,750 a month before deductions. The pension uses the legal minimum, in a scheme where tax relief is added to your pot. These are illustrative figures, not anyone's real payslip.

On top of your £89.20, about £22.30 of tax relief and £66.90 from your employer go into your pot. So around £178 a month goes in, while your take-home only drops by £89.20. The figures assume a standard tax code, no other income, and minimum contributions on earnings between £6,240 and £50,270.

How much will I repay on my student loan?

You repay 9% of what you earn above your plan's threshold, and nothing below it. The amount you owe doesn't change your monthly repayment. GOV.UK is clear on this: your balance "has no impact on how much you repay each year".

Your plan depends on where and when you started your course. You can't choose it. In England, undergraduate courses started between 1 September 2012 and 31 July 2023 are Plan 2. Courses started from 1 August 2023 are Plan 5.

Write-off rules are from GOV.UK's written off page, counting from the April you were first due to repay.

The thresholds can move. The House of Commons Library says the Plan 2 threshold for borrowers from England will stay at £29,385 for three years from April 2027 (Wales won't freeze it). The Plan 5 threshold stays at £25,000 until April 2027, then is meant to rise with inflation.

Why does my student loan balance keep going up?

Because interest is often more than what you repay. When that happens, the Commons Library explains, your balance rises even though you're paying.

The rates for 2026/27 are set out on GOV.UK:

• Plan 5: 4.1%, which is inflation (RPI) only.

• Plan 2: 4.1% if you earn £29,385 or less, rising to 6% at £52,885 or more.

Without a cap, Plan 2 could reach 7.1%. The government capped it at 6% from 1 September 2026 to 31 August 2027. Interest is still added even when you earn below the threshold.

The government expects only about a third of Plan 2 borrowers who started in 2022/23 to repay in full. For people starting in 2025/26, it expects around 55%, according to the Commons Library's student loan statistics. Whatever is left at the end of the term is written off. For many people, a student loan works more like a graduate tax than a mortgage.

Is it worth paying off a Plan 2 student loan early?

For many Plan 2 borrowers, extra payments may not help. If your loan would be written off before you clear it, any extra you pay is money you'd never have had to pay. GOV.UK warns you "might not benefit from making extra repayments", and you can't get a refund on them.

Overpaying is more likely to help if you expect to clear the loan anyway, for example on a high, steady salary. Everyone's situation is different, so we can't say what's right for you. The government's guidance suggests speaking to a financial adviser if you're unsure.

A few facts that might help you weigh it up:

1. There's no penalty for paying early, if you do decide to.

2. Money you overpay is gone for good, while savings stay yours.

Will I get a workplace pension in my first job?

Yes, in most jobs. Your employer must automatically enrol you if you're a worker aged between 22 and State Pension age, earn at least £10,000 a year and usually work in the UK.

The legal minimum is 8% of your earnings between £6,240 and £50,270. At least 3% comes from your employer. The government's own example splits each £80 into £40 from you, £30 from your employer and £10 in tax relief.

Capital at risk. The value of your pension can go down as well as up, and you may get back less than you pay in.

Things worth knowing in your first job:

• Matching. Some employers pay more if you do. MoneyHelper on contribution matching says your employer doesn't have to offer it, so it's worth asking.

• Salary sacrifice. You swap some pay for pension payments, so you pay less tax and National Insurance. A lower salary can mean a smaller mortgage offer, though. From April 2029, National Insurance will be due on sacrifice above £2,000 a year.

• Opting out. You can leave, and you'll get your money back if you opt out within a month. Your employer re-enrols you every 3 years if you still qualify.

• Pension money is locked away until 55, rising to 57 from April 2028, so keep some savings you can reach.

• Keep track of every pot. Pensions UK estimates £31.1 billion sits in 3.3 million lost pots. Our beginner's guide to combining lost pension pots explains your options.

Not employed? Auto-enrolment is for workers, so if you go freelance nobody sets it up for you. Here's how pensions work if you're self-employed.

How much is the State Pension in 2026/27?

The full new State Pension is £241.30 a week, about £12,548 a year. You need 35 qualifying years of National Insurance for the full amount, and at least 10 to get any. From 6 April 2027, the full amount rises to £13,036.40 a year.

Right now it rises every year by whichever is highest: average earnings growth, inflation (CPI) or 2.5%. The Autumn Budget 2026 keeps that rule to April 2029. From April 2030, the third option becomes whatever keeps its value against earnings at the April 2029 level. Our triple lock explainer covers what that means.

It has to cover rent, bills and food on its own, so what you build on top matters. Our guide to how the UK State Pension works has the detail, and this explainer covers the different pension types.

Can I still buy a home, and does a Lifetime ISA help?

Yes, but it's harder than it was. The ONS says the typical home in England cost £300,000 in 2025, which is 7.6 times typical full-time earnings. Nationwide found around 40% of first-time buyers had help with a deposit. If yours can't help, you're in good company, and there are still options.

A Lifetime ISA is one to look at:

• You can open one if you're 18 or over but under 40, and pay in up to £4,000 a year until you're 50.

• The government adds a 25% bonus, up to £1,000 a year.

• You can use it for a first home costing £450,000 or less, at least 12 months after your first payment, or from age 60.

• Buying a first home over £450,000? Since 29 October 2026 the charge is 20%, not 25%. HMRC says that takes back the bonus but lets you keep what you paid in.

• Take money out for anything else and you pay a 25% charge. On £800 plus a £200 bonus, you'd get back £750, less than you put in.

Our ISA vs pension guide compares how the two work side by side.

Should I open a Lifetime ISA before it's replaced?

That depends on your plans, so we can't say what's right for you. What we can do is explain the timetable. From 6 April 2029, a new First Time Buyer ISA replaces the Lifetime ISA for new savers. Lifetime ISAs opened before then carry on under the current rules, so you can keep paying in and using yours.

Figures come from the Budget documents of 28 October 2026. The new account isn't law yet, so details could change.

Two other things to know:

• Growth. The new bonus is worked out on the final balance, so any growth counts towards it.

• No switching. You can't transfer a Lifetime ISA into the new account, but you can use both towards the same home.

If you're thinking about the retirement side too, our guide to choosing between a Lifetime ISA and a pension compares the two.

What is the Your First Home scheme?

It's a new government scheme in England to help first-time buyers buy a new-build home with a smaller deposit. How it's set to work:

• You put down at least 2.5%, and the government lends you 20% of the price.

• The loan is interest-free for 5 years, then 1.5% in year 6 and 3% from year 7.

• Household income must be £110,000 or less, or £140,000 in London.

• When you repay, you pay back 20% of what the home is worth then, so the amount can go up or down.

Pre-registration opens by the end of December 2026, with applications from February 2027 and first sales in April 2027.

What can I do this month?

None of this needs fixing in one go, but these checks are quick:

1. Check your payslip. Make sure your student loan plan is right. If it's wrong, GOV.UK explains how to fix it and get a refund.

2. Find your pension details. Note your provider and log in. If you've lost an old one, the Pension Tracing Service can find contact details.

3. Ask about matching. One email to HR could tell you if your employer pays more when you do.

4. Start a small buffer. MoneyHelper suggests three to six months' essential costs, but says any amount helps.

5. Check your State Pension forecast with the government's online forecast service.

"But I can't afford to save." Heard, and very much understood. That's why we built Chest. Chest turns everyday spending into pension savings: cashback from 160+ brands goes into a Chest self-invested personal pension (SIPP), with tax relief on top. It's in early access now, on iPhone and Android.

Still got questions?

Do I start paying my student loan as soon as I graduate? No. The earliest you start is the April after you leave your course. Even then, you only repay when your pay is over your plan's threshold.

How much student loan do I pay on £35,000? On Plan 2, 9% of £5,615 (£35,000 minus £29,385), which is about £505 a year or £42 a month. On Plan 5, 9% of £10,000, which is £900 a year or £75 a month.

Does my student loan affect my credit score? No. Student loans don't appear on credit reports, but mortgage lenders may still count your repayments.

Can I use a Lifetime ISA and a First Time Buyer ISA for the same home? Yes. You can't move money from one to the other, but both can go towards the same first home.