A comparison of the national minimum wage with the state pension has been shared a number of times in recent weeks on Facebook.
It says: “The government minimum wage so that people can live reasonably is £8.72 an hour x 36hrs equals £314.00 x 4 weeks equals £1,256.00 per month x 12 months equals £15070.00 per year.
“Why is it that pensioners who have paid half a century’s worth of tax and N.I. are given £8840.00 to live on “comfortably”. What a disgrace it makes me sick pensioners are getting nearly half of the minimum wage.”
We wrote about these figures when we initially came across this comparison in 2020, and found they were generally correct but would benefit from some additional context. However, the figures are now significantly out of date, and this is not made clear in many of the more recent posts.
Whether or not you think it is appropriate to compare the minimum wage with the state pension is a matter of opinion, but making any such comparison does require some context.
Inaccurate figures relating to income, tax and pensions often circulate on social media, and posts like these which spread widely can cause confusion for those who see them.
Honesty in public debate matters
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It is correct that in the financial year 2020/21 the national living wage (at the time the minimum for someone aged 25 and over) was £8.72, which, based on someone working the average number of hours a week for a full-time worker (which was 33.6 in 2020, though this was impacted by the Covid-19 pandemic) and receiving paid holiday, was £15,235.
The national minimum wage, which is the minimum per hour for those under 25, varies by someone’s exact age.
However, these figures are now out of date. The national living wage (the minimum for someone aged 23 and over) is currently £9.50 an hour, which, based on the median number of hours worked a week in 2022 (36.4 hours), equates to approximately £17,982 per year.
The national living wage is set to increase in April 2023 to £10.42 per hour (equating to around £19,723 per year).
As we previously wrote, the £8,840 figure per year used in the Facebook post to describe the state pension may have been taken from research done in 2019 by retirement finances company Just Group. The company analysed data between 2015 and 2018 and found that the bottom fifth of single pensioners by income were, on average, receiving about £8,840 in “state benefit income”. This was reportedly made up of £7,644 state benefit (including the state pension) and £1,248 from other sources.
The amount of state pension someone is entitled to varies based on a number of factors, including when you were born, how long you worked and paid national insurance for and whether you got national insurance credits, for example if you were ill or unemployed.
Depending on when you were born, you either get the basic state pension or the new state pension, though not everyone receives the full amount. In 2020, the full amounts for these per year were £6,981 and £9,110.
For 2022/23, the full basic state pension is £141.85 per week (£7,376 per year), while the full new state pension is £185.15 (£9,628 per year).
From April 2023 these amounts are set to increase to £156.2 per week (£8,122 per year) and £203.85 per week (£10,600 per year) respectively.
Context for comparison
Many people receiving the state pension will also receive money from a workplace pension, while some may be eligible for pension credit, or have personal pensions, such as stakeholder pensions or self-invested personal pensions.
Likewise many of those earning the national minimum wage may also receive additional income through things like Universal Credit.
Many people also have to pay tax on their pensions, but do not have to pay national insurance contributions after retirement age.
Image courtesy of Sarah Agnew