To think there is something weird with how this ifs household income calculator is set up?

[whatkatydid2013]

https://ifs.org.uk/tools_and_resources/where_do_you_fit_in#tool-results-section

You can use the above website to get an idea where your household "fits" in terms of income vs average household in the UK. Essentially it takes:

Net earnings (wage or salary income, benefits you receive, income from savings and investment, profits or losses from self-employment, and any other sources of income) less your council tax & gives you an answer.

I put our details in and it has our household in the top 6% yet OH and I both earn well under 6 figures and, after pension contributions, we are entitled to claim child benefit. If we didn't have the kids then even without the benefit we'd be top 3% of households.

I think we are reasonably well off but surely there are enough people who are independently wealthy &/or have 6/7 figure salaries that no one with normal jobs/wages fits in the top 5%? If it's accurate then just how concentrated does that make wealth in the top 1% or less?

True but they must both be earning around 80k each to have a 9k net income, top 6%. That's an enormous amount of pension contributions each

No I checked.

Average salary in 2022 was £33k. After tax/NI = 26,460. Two average salary take home pay is £53k. I input that with our council tax (£1.8k annually) for 2 adults (no kids) & it says:

With a household after tax income of £982 per week, you have a higher income than around 86% of the population - equivalent to about 56.8 million individuals

After tax/NI £110,000 is £70,850 (if all on one income). With no kids that comes out as top 5%. With two kids it comes out as top 15%. You have to earn a fair bit extra to be seen as having the equivalent income with kids.

Our joint income is less than yours excluding my pension & share scheme but our net is still as above as we’ve two tax allowances and then pension + share scheme add an extra £20k that isn’t subject to tax. I’m pretty sure I’m not doing it wrong based on the instructions but that’s partly why I think it’s a bit off

Yes, it's a lot. OP said she was contributing about 16k into hers which has got to be much, much more than average.

But it's straightforward enough how it works. If you earn more than 50k but put enough into your pension, subject to the 40k or 100% limits, soon to be 60k, that's how you end up on full CB.

I knew we were fairly lucky to not be struggling. In fact I hit on this calculator after a conversation with DH saying we were very fortunate.

This puts us in the top 1% which is much higher than I thought. But we earn reasonably well, and have no children. So we are very fortunate to have disposible income.

This puts us in the top 1% which is much higher than I thought. But we earn reasonably well, and have no children.

To be in the top 1% without dc means an net income of 140k minimum, would you class 240k only reasonable??

Oh NET. 😂 There's my error.

Bottom 40% which is no surprise to me. This thread will soon fill up with people on huge incomes moaning about how much they are struggling, though.

Bottom 1/4 which surprises me a bit as I thought we were getting closer to "average. Obviously not 😂

I think this is where median and mode need to be considered. The average mean wage may well be around £35k but the majority of workers earn considerably less, it's just the few very high earners earn co siderably more and 'artificially' inflate the average

In 2022 after tax the median household income was £32,300.

About £2700 per month

That's per household. Not per individual.

Lots and lots and lots of people have an income less than that.

As several of you say it’s likely influenced a lot by what’s normal for you. We are very middling within our circle of friends/neighbours as far as it’s possible to tell from spending habits and what people have mentioned about income/investments. I don’t have a choice about my pension. I have a quoted salary (that’s below £50k) & work then put a lot into my pension on top but OH said I should add it if I was doing the calculation because it is really part of my salary. It really shocked me where we came out and yes I thought between families with senior managers, business owners, those with unearned incomes, etc that a decent % would have very high incomes. You are right that high 6 figures for one in 20 households isn’t so realistic but I would certainly have thought that sort of number would have incomes well over ours. You see so much comment here about costs in London/south and not being able to survive on similar incomes to us and I guess that has led me to the assumption a decent proportion of people there must earn a lot more.

There can't actually be that many households in the UK with two incomes sufficient to pay tax. All of the households that are single person, couples with a SAHP, couples with one worker on less than 12.5k, student houseshares, couples with someone on statutory maternity/paternity pay and pensioner couples where one of them doesn't have much or any private pension, they're really going to add up.

ONS says there were 28.1 million households in the country last year and the proportion of single person households varies between 25% in London and 36% in Scotland. If the average is say 30% nationally, that's a huge chunk taken out already before even considering any of the reasons why households with multiple adults wouldn't necessarily have two full time workers.

It says this for me OP: With a household after tax income of £1289 per week, you have a higher income than around 84% of the population - equivalent to about 55.4 million individuals.

This is based on net income of £5,800 2 kids and council tax £200 per month? That net income is approx and after pensions and other benefits though so I accept not particularly accurate, but I don’t see how it can be equivalent to 2x£35k! V confused!

Well that’s why - it’s not actual income you receive so it wouldn’t count for the purposes of this.

I also wouldn't include the pension, because its a highly unusual salary arrangement and thus rhe calculator doesn't reflect it.

All db pension, teachers, doctors, civil servants etc have massive employer contributions butvthey don't count as income for this purpose.

What is your position without the employer contributions?

Possibly though it definitely says you should only take off tax/NI not what you contribute to pensions and if work paid it as salary instead I’d keep paying in as it’s a final salary pension and I’m massively lucky to have got onto the scheme before they closed it.

No - 100% it’s talking about net income into your household. You employer contributions aren’t income. The example above about db explains it well. You’ve over inflated yourself unfortunately.

But for a final salary scheme the majority of the cost is the employer not the employee contribution.

And the employer contribution doesn't count as income.in any scenario.

So if you have the equivalent of £18k contribution per year, then about £13k of that at least would be employer contribution.

So maybe add £5k on as the employee equivalent

Without it we would drop down to top 15% somewhere. I’m surprised they wouldn’t factor it in as it will vary a lot between people and if work don’t pay it then you will just have to make a contribution out of your salary (assuming you are not on such a low income you can’t). If they don’t it’s going to underestimate the real income of a lot of public sector workers when comparing vs private.

This.

Well it’s not really fortunate or unfortunate but if that is how they’ve calculated then if makes a bit more sense and puts us more where I’d expect.

Apparently my income is higher than 8% of the population.

And to finish the final salary explanation. The money from both employee and employer contributions is going to pay existing pensions. It isn't going into a pot for you like a defined contribution pension.

So the amount the employer pays can vary wildy depending on overall market conditions etc

That's why it can't be counted as income because it isn't yours in any meaningful way.

I got top 6% too (3 kids, £3k pa council tax). We feel fortunate that we have good salaries in a low cost area but right now pay a fortune in childcare and we are relatively young with a big mortgage, building both home equity and pension pots.

DH and I were talking about this recently though - as most of our network (either friends or work) do similar jobs I think most of us feel we are ‘normal’ as we are in an echo chamber. When colleagues are jetting off skiing for the weekend (and we are not in the position to do so at the moment) we don’t feel particularly flush. And because we only have a couple of truly “elite/super rich” friends (I.e. drivers, flying private, country estates and whatnot) we don’t feel poor either.

I’m sure it’s the same for many other ‘bands’ on that graph too.

Yes it would be amazing to be building equity and pension pots.... out of reach for so many.

And a skiing holiday would be a huge expensive just completely out of reach for us. We umed and ahed about saving for the school trip once so child has a taste but we decided against it!

It is different circles...