How degree subject and university choice add value

Over 1.7m UK students will start a degree at a UK university in September. Many have made subject and university choices based on what they are interested in and also what they excel at. Research from the Institute for Fiscal Studies has shown how degree subject and university choice can add value; but also, that gender and social background have an impact on earnings potential.

In general women that are degree educated can expect to earn on average £250,000 more over their lifetime than non-degree educated women. For men the impact is smaller adding £170,000 to the average expected increase of lifetime earnings when compared to non-degree educated men. However, male graduates earn on average 8% more than female graduates one year after graduating, and the upward trend continues; after five years they earn on average 14% more than female graduates. The factor that is influencing earnings is not so much gender as it is subject choice. Women on the whole choose subjects that pay less, for example: psychology, nursing, creative arts, sociology; whereas men choose better paid subjects such as: computing, architecture and engineering.

When well-paid subject choice and Russell Group university choice are combined eg University of Oxford and Economics, or Imperial College and Engineering; graduates earn on average 40% more than graduates with humanities degrees (eg philosophy) from non-Russell Group universities such as The Open University.

Over time the earnings potential gap widens; male students of management studies, law, or economics that studied at the London School of Economics can expect to earn over £300,000 per annum when in their 30s.

Both male and female graduates from households where the income is over £50,000 will earn 20% and 14% more respectively than male and female graduates from households with lower incomes, by the time they are in their early thirties.

Despite ‘Love Island’ being a quicker route to wealth than Oxford or Cambridge – as reported in the Financial Times on 26 July – a degree does add value to earnings potential.

We would advise parents and grandparents that are considering funding further education for offspring to consult an Independent Financial Advisor.

Having the right level of protection assurances such as life, critical illness and income protection policies is important when considering a further education funding plan. As house value is changing fast in the current economic climate; revisiting mortgage terms including life assurance policies with a specialist IFA is recommended.

Cash ISA investments may have been made when children were young, very often they attract an initial fixed interest rate and then after a pre-set term fall back on the providers’ variable rate, which can be quite low. All investments including Cash and Stocks and Shares ISAs should be reviewed to check that they are performing as expected or as planned for.

Planning to fund further education for family members may coincide with retirement and Inheritance Tax planning.

We would recommend speaking to a retirement planning financial expert, and having prepared a budget plan of outgoings and income for the consultation (see our tips on How to prepare to meet an IFA). It is a good idea to consider goals and ambitions for the life-stage that is being entered, this will help the IFA to give specific advice so that desired outcomes can be achieved.

Please call our team of Chichester-based IFAs on 01243 532 635 to arrange a consultation.

To discuss pensions, retirement and investment plans (including ISA’s) with us please ask to speak to Richard Smith.

To discuss Life, serious illness, equity release (to provide for retirement income) and income protection insurances please ask to speak to Hamish Gairns.

To discuss mortgages and insurances please ask to speak to James Mayne.