Redundancy payout and state benefit entitlements

bugrud

Here’s my problem
I am a 56 yr old Uni lecturer earning £52K per annum, facing voluntary severance
I am likely to get £30k redundancy payout, I have a pension pot min 33K – max 60K lump sum, min 750 max 920 monthly incomes and don’t know what to do.
I have 6 months before I am “severed” so have time to do some financial planning.
I don’t have a job to go to – but am avidly looking
Question does anyone know what to do to manage my payout – I calculate in our household that I need to have a monthly income min 1000.00 per month to contribute to husbands salary
How can I manage this – does anyone know if I am I entitled to state benefits or job seekers allowance if I get a redundancy payout – what if I use the £30K to pay an amount off my £75K mortgage – should I draw my pension pot down too – I am 56 so am entitled to start drawing the pension – but of course if I leave it where it is , and possibly successful at getting another job ( but at a much reduced income – say £10 – 15K - ) I can continue with paying into that pension

I really really really do appreciate any help or advice from all you experts,

Many thanks

pmlindyloo

I can answer one of your questions!

When you leave your job after voluntary redundancy you will be entitled to contribution based Job Seekers Allowance.

This is not means tested but based on your NI contributions.

Your savings, household income will have no effect on this payment but you will only be entitled to it for 6 months.

pompeyrich

You WONT get any contribution based benefits if you draw your pension early, however if you dont lose anything by taking the pension early then £920 a month outweighs the CB benefit.

LittleVoice

bugrud wrote: »

Here’s my problem
I am a 56 yr old Uni lecturer earning £52K per annum, facing voluntary severance
I am likely to get £30k redundancy payout, I have a pension pot min 33K – max 60K lump sum, min 750 max 920 monthly incomes and don’t know what to do.
I have 6 months before I am “severed” so have time to do some financial planning.
I don’t have a job to go to – but am avidly looking
Question does anyone know what to do to manage my payout – I calculate in our household that I need to have a monthly income min 1000.00 per month to contribute to husbands salary
How can I manage this – does anyone know if I am I entitled to state benefits or job seekers allowance if I get a redundancy payout – what if I use the £30K to pay an amount off my £75K mortgage – should I draw my pension pot down too – I am 56 so am entitled to start drawing the pension – but of course if I leave it where it is , and possibly successful at getting another job ( but at a much reduced income – say £10 – 15K - ) I can continue with paying into that pension

I really really really do appreciate any help or advice from all you experts,

Many thanks

I assume you are talking about getting another uni lecturing job as I doubt you could continue to contribute to the USS scheme if you were not working in that field. Or are you not with USS in any case?

bugrud

hope you dont think i,m thick but if i draw my pension then i,m not entitled to jsa - is that right ?

many thanks for any info / help

Johnnyboy11

Hi,

Are you sure you're not entitled to an Early Retirement package? This is normal practice for public sector workers over 55 facing redundancy and is hugely more lucrative. I'd ask your Union rep. and also the HR Dept. to explain your options, in writing.

If not, here's a suggestion. Your £30k will be tax free, but your £52k salary isn't. Assuming you pay 7.5% into your pension, then about £5.6k of your salary is taxed at 40%, ouch!

However, if you can afford to pay that £5.6k into a persional pension this tax year from your redundancy lump sum, say into a HL Vantage online SIPP, then it becomes tax-free and HMRC will refund 20% of that figure automatically into your SIPP and you can reclaim the remaining 20% next April by phoning HMRC and submitting evidence of your SIPP payment.

The benefit of doing this is that you'll only pay tax at your marginal rate on your pension, which will likely be less that 20%, rather than the 40% if you take it now. Down side is that your money is tied up, or at least 75% of it, which you need to convert to an annuity at some point.

Me, I'd sink the whole redundancy payment into a SIPP pension and give HMRC not a penny more in tax than absolutely necessary.

[J]

Bigmoney2

bugrud wrote: »

hope you dont think i,m thick but if i draw my pension then i,m not entitled to jsa - is that right ?

many thanks for any info / help

Theoreticaly you are entitled to contribution based JSA for 6months provided you are actively seeking work, BUT it will be reduced by any income you are receiving (pension), so if your pension is more them the JSA amount you won't receive any money from JSA, but can sign on for the NI credits, which you probably won't need if you have 30yrs worth.

Bigmoney2

bugrud wrote: »

Here’s my problem
I am a 56 yr old Uni lecturer earning £52K per annum, facing voluntary severance
I am likely to get £30k redundancy payout, I have a pension pot min 33K – max 60K lump sum, min 750 max 920 monthly incomes and don’t know what to do.
I have 6 months before I am “severed” so have time to do some financial planning.
I don’t have a job to go to – but am avidly looking
Question does anyone know what to do to manage my payout – I calculate in our household that I need to have a monthly income min 1000.00 per month to contribute to husbands salary
How can I manage this – does anyone know if I am I entitled to state benefits or job seekers allowance if I get a redundancy payout – what if I use the £30K to pay an amount off my £75K mortgage – should I draw my pension pot down too – I am 56 so am entitled to start drawing the pension – but of course if I leave it where it is , and possibly successful at getting another job ( but at a much reduced income – say £10 – 15K - ) I can continue with paying into that pension

I really really really do appreciate any help or advice from all you experts,

Many thanks

A bit confused by the part I've highlited.

Are you being offered a choice between redundancy of 30k versus a pension of 750 /month and 60k lump sum or 920 /month and 33k lump sum?

If so then remember when calculating monthly pension income you will pay tax but no NI or pension contributions, you will also get interest on any lump sum you take so the later option (920 /month and 33k lump sum) shouldn't be far off the 1000 a month you need.

patman99

AFAIK income-based JSA (which kicks-in after the first 6 months) takes into account all your household income (inc. your OHs wages). As you will be over the threshhold, you will not get income-based JSA. However, if you claim contrib. based JSA for the 6 months (and assuming you don't gain fresh employment) then your potential taxable income would be £34096 ( based on 22 weeks of JSA @ £65 p/w + 7 months salary).
Don't forget, the 'lump sum' is for your time of service and is NOT countable for Tax. That is why it is always paid separately from your final salary (be-it final months pay or PILON).

Once your 6 months on JSA (assuming you are not back in work), then you can claim your pension.
Having a pension does not stop you getting a job. It just means you pay 20% tax on all your earnings.