What to do with redundancy payment?

greenglide

Of course all IT skills arent the same.

Coal face development skills differ from requirement writers, designers, project / programme managers etc.

Some of the niche skills can be worth a fortune or nothing depending on whether there is a call for them in your area. There is a lot of interest in the legacy space, especially legacy modernisation.

Contract work may be appropriate?

mgdavid

PaulCooper wrote: »

I don't think it's been said in any of the other posts, but the first £30 odd K of a redundancy payment is not taxable.
Take the money if offered, put some of it into a pension fund, as others have suggested (only enough to prevent you paying 40% tax), then take it out in a tax efficient way when you're paying a lesser rate of tax
Best of luck
Paul

The OP's on top of this; post #1 said:
I would get approximately £76,000. I know that this is taxable and this figure would fall to around £57,000 after tax at 40%.

OP, I cannot see a problem with getting further employment in IT in the Reading area. Slap bang in the middle of UK silicon valley; it stood me in good stead for 45 years, my last lot were horrified when I said I was going at 65 :eek:.
And yes contracting is a good call. Ity's only scary until you realise that nobody else knows what they are doing either!!

saver861

Clipperdedoodah wrote: »

Thank you all. I think the fact that I've been with the same employer for so long is also a factor in my nervousness. Part of me is terrified and another part is pleased that I might finally be able to give up my two hour each way commute.

Things change in retirement. For a start off, if you get redundancy and your pension unreduced, you will have paid off some debt/or put some buy for reserve. You would have your pension as an income, if you get it - fingers crossed for that.

So, you are then only needing to make up the shortfall of money. That can be done with part-time work, contracting etc. The plus side for you is that if you don't like it you can change and not totally dependent. The plus side for an employer is that they take you on as a contractor, they ain't stuck with you if they don't like you!!

Lots of possibilities - but I'd always say, sort out the best of your current circumstance first, particularly including your redundancy and pension status. Till you do that, you can't really make any concrete decisions.

Clipperdedoodah

I will definitely come back and update this thread, you've all been very helpful and have given me food for thought. Thank you.

saver861

Clipperdedoodah wrote: »

I will definitely come back and update this thread, you've all been very helpful and have given me food for thought. Thank you.

That's what these forums are for - presenting varying ideas and options.

The key thing though as always, is to clarify anything said on here with pension provider, employer, etc etc. before making any decisions. That way, your decisions will be based on concrete facts.

Clipperdedoodah

It's me again (this one could run and run..)

I was right about the purpose of the meeting. There's one redundancy and they want a volunteer/volunteers.

I had a meeting with HR and asked about paying some of my prospective redundancy into a SIPP and how it actually would work. I think I might be the first person who has ever asked and they didn't seem to know what I was asking. I was told that any redundancy payment would be paid to me in one lump with tax already deducted.

How does this work? At what point does the money go into the SIPP? Does it got straight from my employer to the pension provider? Or through my bank account first?

If my company pension will permit AVCs is this the same as a SIPP?

I also asked about the provision in our plan to take early retirement after 55 with no penalty and was told that although it was in the handbook, it had never happened and would almost certainly never be offered if the redundancy is voluntary. I'm trying to persuade my colleagues that we should present a united front and not to volunteer as I see no benefit in being a volunteer whereas if they choose one of us it will be compulsory redundancy and I might stand a better chance of getting the early retirement (as might my colleagues who are all close to retirement age).
Am I right in that?

greenglide

The money is paid by the employer directly into your occupational pension scheme, in most cases. My employer's scheme will pay all or part of the redundancy payment in excess of £30,000 (the tax free limit) in this way - referred to as "pension augumentation".

This isn't a statuary requirement though.

The employer could, if they wanted, make an employers contribution directly into your SIPP if they wished. If they paid the money to you you like the benefit.

Clipperdedoodah

Great. The earliest I could withdraw it is the next tax year?

saver861

Clipperdedoodah wrote: »

It's me again (this one could run and run..)

Usually these things do run and run!!

Clipperdedoodah wrote: »

I also asked about the provision in our plan to take early retirement after 55 with no penalty and was told that although it was in the handbook, it had never happened and would almost certainly never be offered if the redundancy is voluntary.

Which pension scheme are you in?

Clipperdedoodah wrote: »

I'm trying to persuade my colleagues that we should present a united front and not to volunteer as I see no benefit in being a volunteer whereas if they choose one of us it will be compulsory redundancy and I might stand a better chance of getting the early retirement (as might my colleagues who are all close to retirement age).
Am I right in that?

There may be better conditions and redundancy calculation for voluntary as opposed to compulsory. So, usually it is more beneficial to volunteer in terms of redundancy payment, but it will depend on the organisation.

On the other hand, do you have any redundancy protection insurance on your mortgage? You would need to made compulsorily redundant to claim that.