Chancellor George Osborne has outlined a new national minimum wage for over 25s, dubbed the 'national living wage', which while higher than the current minimum wage is not all it's cracked up to be.

Here are the key points:

  • The new compulsory rate will be set at £7.20/hour next April, rising to £9/hour by 2020, but it only for over-25s.

  • This is higher than the existing minimum wage, which will be £6.70 an hour from October for over-21s.

  • However, it is less than the voluntary living wage that many companies employ, which currently stands at £7.85/hour (£9.15/hour in London). The fear is that as the new compulsory minimum is less, yet uses virtually the same name, that employers will adopt the lower, compulsory version.

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'Pulling a rabbit out of the hat and sleight-of-hand at the same time'

Martin Lewis, founder and editor of says: "The Chancellor has managed a clever double whammy of pulling a rabbit out of the hat and sleight-of-hand at the same time.

"This is not a living wage. He has naughtily nicked the name from the Living Wage Foundation – which sets the living wage at £7.85/hour (£9.15/hour in London) this year. His living wage is £7.20 next year. By using the valued brand of 'the living wage', even though he's not paying that amount, he hopes to get extra credibility.

"While a rise is welcomed, if he wants a living wage, he should've been willing to push it further."

Current minimum wage

In March, the Government announced the following minimum wage hourly rate rises from 1 October 2015:

  • The hourly rate for adults aged 21 and above will rise to £6.70, from £6.50 – a 3% increase.
  • The hourly rate for 18-20-year-olds will rise to £5.30, from £5.13 – a 3% increase.
  • The hourly rate for 16 and 17-year-olds will go up to £3.87 from £3.79 – a 2% increase.
  • The hourly rate for apprentices will rise to £3.30 from £2.73 – a 21% increase.

The rates were recommended by the Low Pay Commission and are based on the inflation forecast of 0.5%, although the Government went further than the suggested figure of £2.80 for apprentices. See's Budget Planner for help managing your cash.

Summer Budget 2015: New national living wage to be introduced (but it's less than the current living wage)