The Financial Uncertainty of Redundancy
With the recent uncertainty regarding job cuts for several local firms, our latest blog explores your financial options when facing redundancy. If you have been made redundant due to the coronavirus pandemic, your employer might be able to re-employ you and pay 80% of your wages using the Government’s Coronavirus Job Retention Scheme.
Being made redundant can cause a lot of stress and uncertainty. There are support packages available to help you if you are facing redundancy. These can help you find new employment or ease you into retirement.
- Redundancy payments if you have worked for the firm for a qualifying number of years.
- A notice period to enable you time to look for new employment.
- A new job role within the same firm.
- Agreed time off for new job interviews.
If you are offered a new role within your existing place of work, you are entitled to a four-week trial in your new role. During this trial period your entitlement to redundancy payment is protected.
If you have worked for the company you are being made redundant from for more than two years, you will be entitled to statutory redundancy pay.
You will get:
- Half a week’s pay for each full year you were aged under 22
- One week’s pay for each full year you were aged 22 to 41
- One and a half week’s pay for each full year you were aged 41+
The length of service is capped at 20 years.
Your weekly pay is the average you earned per week over the last 12 weeks before you received your redundancy notice.
If you have currently been earning less due to furlough, your redundancy pay is what you would have earned normally.
If you were made redundant on or after 6th April 2020, there is a weekly pay cap of £538 meaning the maximum statutory redundancy pay you can receive is £16,140. If you were made redundant before 6th April 2020, these amounts will be lower.
You can calculate your redundancy pay at:
Redundancy pay under £30,000 is not taxable.
You may be entitled to claim certain benefits. These can include:
- Universal Credit – helps with living costs
- New Style Jobseeker’s Allowance – if you are looking for work
- New Style Employment and Support Allowance – if you are ill and unable to work
Pensions and Redundancy
When faced with redundancy, your main concern is usually finding new employment. However, depending on your age, it could be an opportunity to explore early retirement. There are numerous options for your pension(s) when you are being
You can keep your pension where it is, transfer the plan to a new or existing scheme, or take early retirement.
Once your employment has ceased you have the freedom to move pension, and if it is affordable for you, you can place some or all of your redundancy payment in to a pension for later life.
Occasionally, you can do a ‘redundancy sacrifice’. This is where you give up some of your redundancy pay which is then paid into your pension as an employer contribution.
Before making any decisions regarding pensions, it is important to know which type of pension you have, and to seek independent financial advice.
Types of Pensions
The two types of workplace pensions are:
- Defined Contribution – this can take the form of a group personal pension, an
- occupational scheme or a group stakeholder pension. Contributions can continue after employment ends (unless it is an occupational scheme).
- Defined Benefit – also known as a Final Salary Scheme. Contributions cease when employment does.
You should only transfer a pension with financially sound reason. Having a financial adviser look into your options is always a safe and wise option.
Managing your Money
Money can always be a worry, especially if you find yourself unemployed after being made redundant. It is important to take care of your finances and budget well to ensure that you have enough money to last the month. It may be necessary to make cutbacks on non-essential goods if you find your income dropping when you face redundancy.
You may already have insurance in place that can help with this. These include:
- Payment Protection Insurance
- Short-term Income Protection
- Mortgage Payment Protection Insurance
You should check with any lenders whether your mortgage, loan or credit card is covered by insurance. It can help relieve the financial burden of redundancy.
Having savings can also help with the financial burden of redundancy. It is useful to have some money to fall back on should you find your income being reduced or ceasing. It is recommended to have three months’ essential outgoings available in an instant access savings account.
If you are unsure of what your options are when it comes to redundancy, or what to do in regards to your pensions, contact us on 01978 806505 or firstname.lastname@example.org to arrange a 60-minute free consultation to discuss your next steps.
Belgrave Wincham Limited is an appointed representative of ValidPath Limited, which is authorised and regulated by the Financial Conduct Authority under FRN 197107. Belgrave Wincham Limited is registered in England and Wales number 12167416.
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