By Rachel Efetha, Chartered Financial Planner with Anstee & Co.
Even with the Job Retention Scheme, there are predictions that unfortunately, redundancies will increase over the coming months as businesses need to cut costs or fail. People deal with redundancy in different ways.
You will normally be entitled to statutory redundancy pay if you have worked for your employer for more than two years, and you might also be entitled to pay in lieu of notice (also referred to as PILON). For details of the amounts check here. Some employers offer more than the statutory minimum.
What do you need to consider if you are made redundant?
How old are you?
Is retirement an option? You would be surprised at the number of clients I have met in their late 50s who are being made redundant and through Cashflow Planning I have told them they can afford to not get another job. You would also be surprised about how many of them then go back to work a year later because they are bored!!
I cannot afford to retire
If you cannot afford to retire then you need to make sure that whatever money you have will last you until you can get another job. Again, Cashflow Planning will help here to work out just how much you need to live on and how long any emergency fund and redundancy pay/ PILON will last you.
What should I do with my redundancy lump sum?
Do not put all your money in your current account – it will be too easy to lose control of your spending. Pay yourself a ‘salary’ based on either your old net salary or your actual expenditure. Put the rest of it in a deposit account. Once you have found a new job, then you can start thinking about what to do with any excess leftover.
I do not have an emergency fund.
If you haven’t got an emergency fund and/or you aren’t entitled to Statutory Redundancy pay and you’re going to struggle financially then talk to your mortgage provider/ any loans and credit cards you have about payment holidays or how they can help. Do not bury your head in the sand – if you default on certain lines of credit then it could haunt you for a very long time.
Review the perks you had.
Consider your family protection needs – your employer may well have provided ‘Death in Service’ benefits which means that your loved ones will receive a lump sum if you die. Does this need replacing?
Review your pension scheme. Sometimes the pension your employer provides is not the most suitable one for your unique circumstances, but it pays to join it as they will contribute as well as you. Now you have no link with your employer, you might be better off moving it elsewhere.
How I can help you if you are made redundant.
If you are in this position please pick up the phone for a no-obligation consultation. If you are an employer who is making redundancies, then I will be happy to provide redundancy seminars and counselling for your employees. In a previous role, I did the same for the employees of The News of the World when it was closed overnight.
Finally, if you have any thoughts or comments about this article, “Redundancy. What should I do if I am made Redundant?”, then please let me know.
The information contained in this article is for information purposes only and does not constitute advice. No action should be taken based on this information alone. Anstee & Co is authorised and regulated by the Financial Conduct Authority (FCA).