8 things to consider if you are about to receive redundancy pay
Understanding your options when receiving redundancy pay could be crucial to helping you manage your finances.
With many companies announcing job losses, the prospect of being made redundant is sadly a real possibility for some employees.
While redundancy can be stressful to think about, a difficult situation can be made worse if people don’t understand their options, points out Jonathan Watts-Lay, director of WEALTH at work, a specialist provider of financial education and guidance in the workplace.
“Financial education and guidance offered by employers can really help employees to look at the bigger picture, and work out what steps they need to take,” Watts-Lay notes.
WEALTH at work offers workplace redundancy support to help people to understand their redundancy package, and highlights there are a number of things to think about.
Here, they outline eight key things to consider if you are about to receive redundancy pay…
Any tax which will need to be deducted from your redundancy payment needs to be considered. Some people may find they end up in a higher tax bracket, depending on their income and redundancy pay.
2. Your budget
Calculate your assets, including pensions, savings, Isas, property and investments. Also consider your liabilities – such as a mortgage, other debt, childcare, insurance and utility bills.
Look at any other household income and expenses. If the money needed each month is more than what’s coming in, consider what you can do to cover your costs. The Money Advice Service has a budget planner at moneyadviceservice.org.uk/en/tools/budget-planner.
If you can afford to, it might be worth using some of your redundancy payment to pay off expensive debts.
4. Your mortgage
Depending on your circumstances, it may be worth overpaying on your mortgage. Doing this could save someone thousands of pounds in the longer term, depending on the outstanding balance, interest rate and how long is left on the loan.
5. Your retirement
If you are nearing retirement age, you may consider the idea of retiring early. For some people this may be realistic, if they can maintain their living standards.
6. Where you’ll keep your company pension
You can keep your pension with your previous employer until you retire. Or you could move it to a new workplace pension scheme, or a private pension, to keep savings together.
But there can be transfer costs, investment charges are not all the same and the range of investment options varies between schemes – so check before moving your pension.
7. Your pension contributions
It may be worth considering paying some of your redundancy pay into your pension. There are limits on the tax relief you can receive from pension contributions each year, so check carefully.
Unfortunately, some people won’t think twice about scamming someone out of their redundancy pay. If you are looking for somewhere to keep it beyond your current account, do your research. Before handing over any money, check a firm is regulated by the Financial Conduct Authority (FCA).
The Press Association
Latest posts by The Press Association (see all)
- Felicity Kendal joins cast of musical Anything Goes - January 22, 2021
- Study: Over-50s’ mental health declined during lockdowns - January 22, 2021
- Michelle Pfeiffer to play Betty Ford in First Lady anthology series - January 22, 2021
- 7 simple bakes using ingredients you’ve already got in the cupboard - January 22, 2021
- Why exercising for 2 minutes every half hour could be all you need to do - January 22, 2021
Leave a Comment!
Community Terms & Conditions
These content standards apply to any and all material which you contribute to our site (contributions), and to any interactive services associated with it.
You must comply with the spirit of the following standards as well as the letter. The standards apply to each part of any contribution as well as to its whole.
be accurate (where they state facts); be genuinely held (where they state opinions); and comply with applicable law in the UK and in any country from which they are posted.
Contributions must not:
contain any material which is defamatory of any person; or contain any material which is obscene, offensive, hateful or inflammatory; or promote sexually explicit material; or promote violence; promote discrimination based on race, sex, religion, nationality, disability, sexual orientation or age; or infringe any copyright, database right or trade mark of any other person; or be likely to deceive any person; or be made in breach of any legal duty owed to a third party, such as a contractual duty or a duty of confidence; or promote any illegal activity; or be threatening, abuse or invade another’s privacy, or cause annoyance, inconvenience or needless anxiety; or be likely to harass, upset, embarrass, alarm or annoy any other person; or be used to impersonate any person, or to misrepresent your identity or affiliation with any person; or give the impression that they emanate from us, if this is not the case; or advocate, promote or assist any unlawful act such as (by way of example only) copyright infringement or computer misuse.
Nurturing a safe environment
Our Silversurfers community is designed to foster friendships, based on trust, honesty, integrity and loyalty and is underpinned by these values.
We don't tolerate swearing, and reserve the right to remove any posts which we feel may offend others... let's keep it friendly!