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

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%. Twenty years ago, in 2002/3, employers got 38 applications per graduate job. Now it's 140.

AI may be part of it. Recruiter Morson reports that entry-level jobs have fallen by nearly a third since ChatGPT launched.

Pay hasn't kept up either. The Resolution Foundation found real wages rose by 2.2% in total, not per year, in the 16 years to the end of 2023.

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, and data showing referrals are seven times more likely to be hired than job board applicants.

• Treat your first job as a starting point. It doesn't need to be forever. It needs to teach you something.

• 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: Income Tax, National Insurance, your pension and your student loan. 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. The write-off clock starts from the April you were first due to repay. For Plan 4, it depends on when you got your first loan.

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 has said it 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 money leaves your pay every month.

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.

It's been worse. Between September 2023 and August 2024, RPI was 13.5%. Plan 2 rates were capped at 7.3%, then rose to 8%, according to the Commons Library.

This is the part that changes how you think about the loan. 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". It also says 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. GOV.UK 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. Student loans don't show on your credit report. Mortgage lenders may still count repayments when checking what you can afford.

3. Money you overpay is gone for good. Money in an emergency fund or savings stays 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 22 or over, 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. GOV.UK'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. Note the provider each time you change jobs. 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.

It rises every year by whichever is highest: average earnings growth, inflation (CPI) or 2.5%. That's a useful base, but it has to cover rent, bills and food on its own. So what you build in a workplace pension or savings 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 option to look at:

• You open it between 18 and 39, and can 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.

• 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.

What can I do this month?

None of this needs fixing in one go. These checks take about as long as a long lunch break:

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. Small, regular amounts often work best.

5. Check your State Pension forecast with the government's online forecast service, so you know where you stand.

"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 beta at the moment.

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. Lenders may still look at your repayments when working out how much you can borrow for a mortgage.

Is my student loan wiped after 25 years? It depends on your plan. Plan 2 loans are written off after 30 years and Plan 5 loans after 40 years. Some older Plan 1 loans are written off after 25 years.

Can I opt out of my workplace pension? Yes. Opt out within a month of being enrolled and you get back what you paid in. Your employer will re-enrol you every 3 years if you still qualify, and you can ask to opt back in.

How do I find a pension from an old job? Check old payslips or emails for the provider's name. If you only know the employer, the Pension Tracing Service can give you the scheme's contact details.