Redundancy Payment

hugo15

I am currently in the process of redundancy consultation and have provisionally been accepted for VR. Now thinking of where I'm going to put my pay off if I go.

Top up ISA to £20k
Top up premium bonds to £50k

Not able to make a one off contribution to company pension as I'm awaiting a pension sharing order to go through, but will open up a SIPP in March '25 once I know where I'm at as I will be looking for a new job.

Mortgage is fixed at 1.5% until June '26 so not looking to pay that off just yet.

What else should I be thinking about other than spreading across a number of cash accounts?

eskbanker

The Flowchart - UKPersonalFinance Wiki offers a structured process to help decide what to do with money....

Mark_d

When I took VR, a few years back, I put the pay off in a savings account.  The money was useful in setting up my property to let out, and then assisting with expenses relocating for my new job.

kempiejon

I guess it depends how much you have. It's easier to deal with £20k than £100k - but I'd rather have the big problem.

I took my payoff and popped enough into the SIPP up to my annual maximum. Then PBs, ISA was full already. I also bought myself an indulgent present. The balance was earmarked for living expenses as I did not intend to work the rest of the year.
Short dated bonds have a known fixed return and timescale and can help minimise tax on savings.

Alexland

hugo15 said:

INot able to make a one off contribution to company pension as I'm awaiting a pension sharing order to go through, but will open up a SIPP in March '25 once I know where I'm at as I will be looking for a new job.

When my pension sharing was implemented the provider used my account valuation on the date the order was issued (else your ex would be benefiting from your post-divorce regular contributions) but you might want to check what your provider would do. I was lucky as markets were in a mini-dip at the time.

If the redundancy is over 30k then making a pension contribution (and perhaps using carry forward of unused allowance from previous tax years if required) might avoid heavy taxation especially if you intend to have other income during the rest of this tax year.

Redundancy and divorce are a big life changes so good luck with that.

Albermarle

but will open up a SIPP in March '25 once I know where I'm at as I will be looking for a new job.

Just be aware that you can only claim tax relief on earned income in the same tax year. So I would not wait until late March to open a new pension in case there is some technical issue.

Could be if you have a new job/pension, you could make a big lump sum payment to that. Most, but not all. will allow it. 

Top up premium bonds to £50k

Although tax free, the average return can be beaten by non ISA savings accounts ( easy access and fixed ) , even if you have to pay tax on some of the interest.

boingy

Before you tie up too much in a pension cast an eye over that mortgage and ask yourself how you'd cope if that rate triples or quadruples when your fix ends in two years. You might want to keep something aside to give you the option to reduce the mortgage at that point.