Redundancy / retirement confusion - help please!

fairylights_2

My mum has just found out that she's being made redundant (her company seem to be trying to bully her to going back to full time work from 30 hours per week). They've offered her 3 months pay on top of her statutory redundancy. Sadly, my parents pension planning has not been great and they're completely confused as to where they stand. Both the mortgage and the loan for her car are due to finish in 2008, which is when she SHOULD retire (she's currently 62).

Where does she stand as far as claiming her state pension and working goes? She's thinking about trying to get some temping work or something, on the assumption it's going to be difficult to find a three/four day a week job at her point in life, but doesn't know whether that affects either her state or company pensions.

What would you advise? I don't want my parents to be up the creek if there's some good advice they can get. They're trying to work out whether her redundancy might cover the loan/mortgage, but it doesn't sound like either will completely ...

Thanks!

margaretclare

Hi

She can draw her state pension and she can work as well. I worked up to age 67 so I know it's possible. What kind of work does she do? Agencies like Adecco are not 'ageist' even if some of their clients are. (I know, I worked for Adecco).

Of course, all of your income is taxable. I guess some of the experts will be along soon.

Has your mum had a pension forecast - does she know how much state pension she'll be entitled to? Try this: http://www.thepensionservice.gov.uk/atoz/atozdetailed/retirement.asp

Best wishes

Aunty Margaret

EdInvestor

Here's where to apply for a state pension forecast:

http://www.thepensionservice.gov.uk/atoz/atozdetailed/rpforecast.asp

Is the company pension with the company she's currently working for, or does she have several?

Debt_Free_Chick

As already advised, State pensions become payable automatically at State Pension Age, irrespective of your circumstances. So you get your State Pension even if you are still working. You can, of course, defer payment of your State Pension to a later date, in which case it will start later, but be paid at a higher rate - the increase reflects the fact that you put off the start date. State Pension Age for men is age 65. For your mum, her State Pension Age is 60 (but for other women it's either age 60, age 65 or some date in between depending on when they were born.)

The redundancy payment, if it's less than £30k, will be paid tax-free. So while it only sounds like 3 months money, the amount mum recieves is more likely to be the equivalent of 5 months money. This applies only the compensation payment and not any amount which is a payment in lieu - mum's company should set out the precise makeup of the total payment.

Assuming mum has the equivalent of 5 months pay, then this will take care of the next 5 months mortgage payments - or a certain chunk of them. However, I would suggest that mum & dad phone the car loan company and ask for the "settlement figure". This is the lump sum payable now, in order to fully repay the loan. They should consider doing this as it will be one less monthly payment to burden them. OK, they use some of mum's redundancy money, but it means no more monthly loan repayments to make This is quite an important consideration when future monthly income is not certain.

Do mum & dad have any other pensions at all?

They need to do a full budget showing ALL their monthly expenditure, so they know how much they need coming in, just to pay the bills. This is the most important thing they need to do, so they should draw up their budget as soon as possible. There's a template on the main site or at the top of the Debt Free Wannabe board.

HTH

CIS

The key point is your mums alreasy over state pension age, that changes things.

As mums 62, then she could already have been drawing any state pension she has in her own right, if she hasn't claimed it , it will have been automatically deferred for her.

As shes over SPA, a pension forecast is no good, shes too late to get one. She needs to contact the Pension Service on 0845 60 60 265 for help or send in a form BR1 to claim her pension http://www.thepensionservice.gov.uk/pdf/br1/br1apr05.pdf.

She can draw her pension if shes working but it is classed as taxable income.

fairylights_2

She spoke to the pensions office yesterday. She's not been able to get hold of the people who sort her work pension. She also rang about her car. They owe 7.5k on the car loan, and her redundancy will probably be around that amount. They realise the shortfall between work and pension will be about £500 per month. I suggested they get an expert to tell them what they think the car is worth, because - I think - they need to be sure they'll be getting that much worth of car (does that make sense?!). Also if the car loan is £200 a month that would only put them £300 out, which I'm sure they could trim from their living budgets. I've offered to go help them with their budgets so we'll see how it goes. I think she REALLY wants to retire but she knows if she does their lifestyle will have to change dramatically.

Thanks for the advice