How to find financial balance after lost employment or redundancy in uncertain financial times.
Guy Myles, 15 September 2020
It is common for us to get approached by people who are concerned about redundancy and in these uncertain times we have received many more enquiries about this life-changing event. This is one of the biggest issues that can happen to your finances and how you manage it can make a big difference to your life. Luckily the processes we use for financial advice generally can be adapted easily to this area and this allows us to be consistent in how we help people.
One part of personal financial advice is the attempt to find balance in someone’s finances. Within a plan everything is connected so changing one variable may mean we need to change another. So if you save more now you can spend more later. Or if you retire earlier you should expect to take less income each year in retirement. Striking the balance is completely individual but the right framework can make the trade-offs clear and will allow us to look at the uncertainty within it. Redundancy is a significant change in circumstances and will often mean the balance needs to change in someone’s plan.
The most common initial questions we get asked are “how can I reduce the tax due on my redundancy payment?” and “can I access my workplace pension scheme now I’m leaving the employer?”. There are steps you can take to reduce tax on and redundancy payments including making new pension contributions but the rules are quite complicated. Similarly you can gain greater control of your workplace pension scheme, however, it may not be a good idea to move or change it even if you are leaving the business, as this could leave you worse off in retirement. In addition, if you are over age 55 you may also be able to start taking income and/or tax-free cash from the pension scheme to help you through this difficult period, however, in all these cases you should also take financial advice before taking any action.
If you are being affected by redundancy we want to reassure you that normally we can find ways to improve your situation, and by creating a balanced plan for you, we can also give you peace of mind. Taking action is a positive step you can take today, to help you regain control.
For more, watch Guy present on this topic here: https://youtu.be/BGZAMn-H8lc