I really enjoyed two recent FT articles about the squeezed “middle” struggling on £200k household incomes.
The first FT article profiled a 45 year old married lady living south of the river with her husband and kids. Their earnings “nudge £200,000 a year”. The lady says:
“In theory, with our household income, we are in the top 5 per cent of the UK population and yet it does not feel that way,” she says. “If you’re earning millions of pounds, then you’re OK — and at the other end of the spectrum you get everything paid for. We are caught in the middle where we are paying for everything.”
The article lists various things squeezing couples like this:
- School fees. Killik & Co reckon there has been a 342% increase since 1990 in average private school day fees.
- Childcare. Nursery costs have risen by 69% in 10 years.
- Loss of child benefit. This benefit, worth a maximum of £1k per child, feels more symbolic than real to me for £200k households, but the symbolism is powerful.
- House prices. Up 475% in 30 years. And transaction costs have risen from less than 4% to potentially 15%. This means the old ‘upgrade every 7 years’ no longer works.
The article also cites a real issue of pension provision, as the funds required to maintain incomes of anywhere approaching £200k per year are far beyond what most ‘squeezed’ couples can dream of amassing. And more to the point the maximum tax-free pension pot of £2m per couple would not generate anything like their pre-retirement income.
In his article the following week, Janan Ganesh brings wonderful scorn and observation to the uproar that the first FT article caused. Without even mentioning the article’s obvious omissions about lower mortgage costs and lower inflation, and with a down-to-earth groundedness that many of the FIRE community would appreciate, Ganesh reminds us of the average incomes in this country: Continue reading “London’s squeezed middle”
