At a glance

  • UK redundancies have risen sharply in recent months and are expected to continue doing so for as long as social restrictions remain in place
  • The financial repercussions of redundancy can be wide-ranging; but whatever their impact, there are likely to be some difficult decisions to make
  • Whether you’re just trying to get by or you’re focused on putting long-term financial foundations in place, there are steps you can take to find a way forward

At a glance

  • UK redundancies have risen sharply in recent months and are expected to continue doing so for as long as social restrictions remain in place
  • The financial repercussions of redundancy can be wide-ranging; but whatever their impact, there are likely to be some difficult decisions to make
  • Whether you’re just trying to get by or you’re focused on putting long-term financial foundations in place, there are steps you can take to find a way forward

At a glance

  • UK redundancies have risen sharply in recent months and are expected to continue doing so for as long as social restrictions remain in place
  • The financial repercussions of redundancy can be wide-ranging; but whatever their impact, there are likely to be some difficult decisions to make
  • Whether you’re just trying to get by or you’re focused on putting long-term financial foundations in place, there are steps you can take to find a way forward

The economic effects of the pandemic show no signs of easing up even as vaccine developments offer hope for the longer term.

The UK government’s extension of the job retention ‘furlough’ scheme in November came too late for more than 300,000 workers made redundant in the previous quarter1. The increase in unemployment was the biggest in more than a decade.

The loss of a job can mean different things for those affected. In many cases it will cause serious financial and emotional distress. For others it provides an unwelcome challenge and more obstacles to overcome. And there will be some for whom it comes with a silver lining, with redundancy payments offering a chance to hit the reset button.

But wherever you are on that spectrum, there will be decisions to make and plenty to think about. Here are some of the key points to be aware of if you’ve been made redundant.

Know what to expect

Your redundancy payout will depend on factors such as age, length of service and level of earnings. Statutory redundancy is paid if you have at least two years’ service with your employer. If you’re under the age of 22, you’re entitled to half a week’s pay for each full year you have worked; this rises to one week’s pay per year of service between the ages of 22 and 41, and increases again to one and a half week’s pay per full year of service if you’re over 41. Check out the Government’s website for full details of statutory redundancy criteria.

You may get an additional payment from your employer, depending on the contract you have with them. It’s worth noting that the first £30,000 of redundancy payments is free of tax and National Insurance (NI). If your payout is worth more than that, you’ll want to know how much tax you can expect to pay on the amount over £30,000 before you go much further.

Get the basics covered

With household income suddenly reduced or lost entirely, you’ll quickly need to work out if you can keep on top of the bills that you’re legally obliged to pay (such as council tax) as well as the day-to-day living essentials, such as rent, mortgage and utility bills.

If you think you might struggle with mortgage or other regular debt repayments, contact your provider as soon as possible to see what help they can offer. Lenders are required to support customers experiencing difficulties, particularly under temporary legislation that allows borrowers to apply for (or extend) mortgage holidays.

If you’re still struggling, get free debt advice as soon as you can. StepChange, Citizens Advice and National Debtline are the first ports of call. Also check for any state support you may be entitled to, with the benefits calculators at Turn2Us and Entitledto a good place to start.

Stick or twist?

Redundancy may prompt you to think about stopping certain regular payments, such as pension contributions and insurance premiums. Putting pension contributions on hold can make sense if you need to cut costs, and providers will usually allow you to do this without penalty. But make sure you resume your contributions as soon as you can, so you don’t undo all your good work.

Insurance premiums are a slightly different matter. Life insurance and protection plans are designed to help you or your family in the event of your death, a serious health condition or being unable to work because of illness or an accident. Similarly, cutting home or car insurance can leave you financially exposed further down the road.

Contact your insurer if you think you can’t maintain your premiums, as they may be able to help in some way.

Think about your goals

Redundancy can be a trigger for reviewing your overall financial situation and your goals, whatever your circumstances. Your short-term goals may include building a rainy-day fund to bolster your financial resilience, or simply finding a way to get by.

Others will have the opportunity to consider their long-term goals, particularly if they received a generous payout. This may involve working out how the money can be used to boost retirement savings. It can also be a good time to review your pensions and make sure they are working hard for you, whether you keep your money in your employer’s pension scheme or transfer to a new employer once you’re working again.

Future-proof your family finances

Some 12 million UK adults are now classed by the Financial Conduct Authority as having low financial resilience – a figure that has jumped by two million since the beginning of the pandemic2.

The first line of defence against financial troubles is – where possible – to build an emergency fund that helps you cover your essential payments even if your income falls. You should aim to have at least three months’ worth of essential expenses saved as a buffer.

Insurance policies can also provide invaluable peace of mind over the longer term. Income protection plans, for example, pay out between 50% and 65% of your income if you’re unable to work because of illness or an accident. It doesn’t always cover unemployment because of redundancy, although that can sometimes be added on. If the cost of premiums is a concern, you may be able to reduce them by taking out a policy that covers a fixed period of time (as opposed to the rest of your working life).

The economic effects of the pandemic show no signs of easing up even as vaccine developments offer hope for the longer term.

The UK government’s extension of the job retention ‘furlough’ scheme in November came too late for more than 300,000 workers made redundant in the previous quarter1. The increase in unemployment was the biggest in more than a decade.

The loss of a job can mean different things for those affected. In many cases it will cause serious financial and emotional distress. For others it provides an unwelcome challenge and more obstacles to overcome. And there will be some for whom it comes with a silver lining, with redundancy payments offering a chance to hit the reset button.

But wherever you are on that spectrum, there will be decisions to make and plenty to think about. Here are some of the key points to be aware of if you’ve been made redundant.

Know what to expect

Your redundancy payout will depend on factors such as age, length of service and level of earnings. Statutory redundancy is paid if you have at least two years’ service with your employer. If you’re under the age of 22, you’re entitled to half a week’s pay for each full year you have worked; this rises to one week’s pay per year of service between the ages of 22 and 41, and increases again to one and a half week’s pay per full year of service if you’re over 41. Check out the Government’s website for full details of statutory redundancy criteria.

You may get an additional payment from your employer, depending on the contract you have with them. It’s worth noting that the first £30,000 of redundancy payments is free of tax and National Insurance (NI). If your payout is worth more than that, you’ll want to know how much tax you can expect to pay on the amount over £30,000 before you go much further.

Get the basics covered

With household income suddenly reduced or lost entirely, you’ll quickly need to work out if you can keep on top of the bills that you’re legally obliged to pay (such as council tax) as well as the day-to-day living essentials, such as rent, mortgage and utility bills.

If you think you might struggle with mortgage or other regular debt repayments, contact your provider as soon as possible to see what help they can offer. Lenders are required to support customers experiencing difficulties, particularly under temporary legislation that allows borrowers to apply for (or extend) mortgage holidays.

If you’re still struggling, get free debt advice as soon as you can. StepChange, Citizens Advice and National Debtline are the first ports of call. Also check for any state support you may be entitled to, with the benefits calculators at Turn2Us and Entitledto a good place to start.

Stick or twist?

Redundancy may prompt you to think about stopping certain regular payments, such as pension contributions and insurance premiums. Putting pension contributions on hold can make sense if you need to cut costs, and providers will usually allow you to do this without penalty. But make sure you resume your contributions as soon as you can, so you don’t undo all your good work.

Insurance premiums are a slightly different matter. Life insurance and protection plans are designed to help you or your family in the event of your death, a serious health condition or being unable to work because of illness or an accident. Similarly, cutting home or car insurance can leave you financially exposed further down the road.

Contact your insurer if you think you can’t maintain your premiums, as they may be able to help in some way.

Think about your goals

Redundancy can be a trigger for reviewing your overall financial situation and your goals, whatever your circumstances. Your short-term goals may include building a rainy-day fund to bolster your financial resilience, or simply finding a way to get by.

Others will have the opportunity to consider their long-term goals, particularly if they received a generous payout. This may involve working out how the money can be used to boost retirement savings. It can also be a good time to review your pensions and make sure they are working hard for you, whether you keep your money in your employer’s pension scheme or transfer to a new employer once you’re working again.

Future-proof your family finances

Some 12 million UK adults are now classed by the Financial Conduct Authority as having low financial resilience – a figure that has jumped by two million since the beginning of the pandemic2.

The first line of defence against financial troubles is – where possible – to build an emergency fund that helps you cover your essential payments even if your income falls. You should aim to have at least three months’ worth of essential expenses saved as a buffer.

Insurance policies can also provide invaluable peace of mind over the longer term. Income protection plans, for example, pay out between 50% and 65% of your income if you’re unable to work because of illness or an accident. It doesn’t always cover unemployment because of redundancy, although that can sometimes be added on. If the cost of premiums is a concern, you may be able to reduce them by taking out a policy that covers a fixed period of time (as opposed to the rest of your working life).

The economic effects of the pandemic show no signs of easing up even as vaccine developments offer hope for the longer term.

The UK government’s extension of the job retention ‘furlough’ scheme in November came too late for more than 300,000 workers made redundant in the previous quarter1. The increase in unemployment was the biggest in more than a decade.

The loss of a job can mean different things for those affected. In many cases it will cause serious financial and emotional distress. For others it provides an unwelcome challenge and more obstacles to overcome. And there will be some for whom it comes with a silver lining, with redundancy payments offering a chance to hit the reset button.

But wherever you are on that spectrum, there will be decisions to make and plenty to think about. Here are some of the key points to be aware of if you’ve been made redundant.

Know what to expect

Your redundancy payout will depend on factors such as age, length of service and level of earnings. Statutory redundancy is paid if you have at least two years’ service with your employer. If you’re under the age of 22, you’re entitled to half a week’s pay for each full year you have worked; this rises to one week’s pay per year of service between the ages of 22 and 41, and increases again to one and a half week’s pay per full year of service if you’re over 41. Check out the Government’s website for full details of statutory redundancy criteria.

You may get an additional payment from your employer, depending on the contract you have with them. It’s worth noting that the first £30,000 of redundancy payments is free of tax and National Insurance (NI). If your payout is worth more than that, you’ll want to know how much tax you can expect to pay on the amount over £30,000 before you go much further.

Get the basics covered

With household income suddenly reduced or lost entirely, you’ll quickly need to work out if you can keep on top of the bills that you’re legally obliged to pay (such as council tax) as well as the day-to-day living essentials, such as rent, mortgage and utility bills.

If you think you might struggle with mortgage or other regular debt repayments, contact your provider as soon as possible to see what help they can offer. Lenders are required to support customers experiencing difficulties, particularly under temporary legislation that allows borrowers to apply for (or extend) mortgage holidays.

If you’re still struggling, get free debt advice as soon as you can. StepChange, Citizens Advice and National Debtline are the first ports of call. Also check for any state support you may be entitled to, with the benefits calculators at Turn2Us and Entitledto a good place to start.

Stick or twist?

Redundancy may prompt you to think about stopping certain regular payments, such as pension contributions and insurance premiums. Putting pension contributions on hold can make sense if you need to cut costs, and providers will usually allow you to do this without penalty. But make sure you resume your contributions as soon as you can, so you don’t undo all your good work.

Insurance premiums are a slightly different matter. Life insurance and protection plans are designed to help you or your family in the event of your death, a serious health condition or being unable to work because of illness or an accident. Similarly, cutting home or car insurance can leave you financially exposed further down the road.

Contact your insurer if you think you can’t maintain your premiums, as they may be able to help in some way.

Think about your goals

Redundancy can be a trigger for reviewing your overall financial situation and your goals, whatever your circumstances. Your short-term goals may include building a rainy-day fund to bolster your financial resilience, or simply finding a way to get by.

Others will have the opportunity to consider their long-term goals, particularly if they received a generous payout. This may involve working out how the money can be used to boost retirement savings. It can also be a good time to review your pensions and make sure they are working hard for you, whether you keep your money in your employer’s pension scheme or transfer to a new employer once you’re working again.

Future-proof your family finances

Some 12 million UK adults are now classed by the Financial Conduct Authority as having low financial resilience – a figure that has jumped by two million since the beginning of the pandemic2.

The first line of defence against financial troubles is – where possible – to build an emergency fund that helps you cover your essential payments even if your income falls. You should aim to have at least three months’ worth of essential expenses saved as a buffer.

Insurance policies can also provide invaluable peace of mind over the longer term. Income protection plans, for example, pay out between 50% and 65% of your income if you’re unable to work because of illness or an accident. It doesn’t always cover unemployment because of redundancy, although that can sometimes be added on. If the cost of premiums is a concern, you may be able to reduce them by taking out a policy that covers a fixed period of time (as opposed to the rest of your working life).

References

1. ONS, Redundancies: People who have been made redundant or have taken voluntary redundancy, November 2020

2. Financial Conduct Authority, Financial Conduct Authority highlights continued support for consumers struggling with payments, October 2020

Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by us or St. James's Place. Please note that clicking a link will open the external website in a new window or tab.

References

1. ONS, Redundancies: People who have been made redundant or have taken voluntary redundancy, November 2020

2. Financial Conduct Authority, Financial Conduct Authority highlights continued support for consumers struggling with payments, October 2020

Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by us or St. James's Place. Please note that clicking a link will open the external website in a new window or tab.

References

1. ONS, Redundancies: People who have been made redundant or have taken voluntary redundancy, November 2020

2. Financial Conduct Authority, Financial Conduct Authority highlights continued support for consumers struggling with payments, October 2020

Links from this website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, products or services by us or St. James's Place. Please note that clicking a link will open the external website in a new window or tab.

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