Income Protection/ Redundancy: Offset (?)

ajwid01

Hi,

Briefly, I've been employed for about 4 years (come June), and in the last 18 months I will have survived something like 4 company restructures.

Our Chairman has changed, and our divisional Director has left the company.

I'm conscious that yet ANOTHER re-org will be on the way, either being led by the Chairman, the new Director, or both in tandem!

I am the sole breadwinner in my family, and I have 2 small children.

I believe I will get something akin to 1 month's salary for each year of service as part of any potential redundancy package. I will also likely get 2 months pay in lieu of notice should the worst happen.

My profession is IT, and the market seems very *dead* at the moment for my skillset, and I'm not confident this will be changing for the better - in light of global credit crunch and possibilities of recession...

I was entertaining the thought of taking out some income protection insurance, but am unsure how this would work in conjunction with my redundancy package.

My ideal scenario would be:

I could use the Redundancy payment to settle some outstanding debts and make it possible for me to survive on less money - and perhaps take a lower paid job than I would otherwise be able to. In the interim, I could use the Income Protection Insurance cover to survive on...

---

My worry is that the one-off Redundancy payment would be offset against any Income Protection insurance payouts - thus negating the value of the severance package entirely....

I'm quite well paid as things stand, and I'm pretty sure I would find it difficult in the current workplace climate to find an equally well-paying job in the short term. That's why my thought of taking the severance money to lessen my outgoings would be a great solution for the future - until I can get back on my feet...

Are insurers able to take into account severance package payments - and consider it as "earned income" (even though I believe it is normally untaxed)?

I'd welcome comments from anyone with any insight to this kind of thing.

Some research I did a few months ago suggested I could get some reasonable unemployment income protection for about £40+ per month. (I think that was with Antinsurance, that I noted down from this site.)

For me, paying £40 per month during this period of uncertainty will give good peace of mind. Just want to make sure I don't turn around and view it as "wasted expense" if it gets watered down by the redundancy package.

There have been no formal announcements about prospective Redundancies just yet... just a lot of rumour and speculation. Although obviously, I don't want to leave it so late that they announce it, I get placed "at risk", and that would negate the prospect of me getting covered!!!!

Are there any sorts of exclusions that I need to watch out for too; for example: "If you get placed 'at risk' of redundancy within X months of taking out the policy, your cover will be annulled!"

Is there anything else I should be considering to give myself peace of mind at this moment?

I have tried to scour through this site before writing this personal post, but hadn't found any directly relevant info: but I'll keep looking.

My apologies if anyone has ever posted something like this historically, and you've all seen it before! {I know that sometimes happens.}

Best regards,

- Tony.

dunstonh

the redundancy package should have no impact on your personal arrangements. Indeed, the employer doesnt need to know what you have.

ajwid01

Aaah, it was mostly from the perspective of the *insurer* that I was worried about. The Redundancy package won't change.

I was just wondering whether the insurer takes into account any 'severance' package that you get and tries to offset any of it's financial liabilities towards you because of it (where it exists).

T.

[Edit:]

Just re-read the way I phrased myself, and it does sound like I was expecting the redundancy to be offset by any prospective insurance payouts. Please forgive me. I did mean it to read the other way around. :-o

dunstonh

The insurance company wont care either. However, if garden leave is involved then that is still classed as employment and you wont qualify until garden leave is completed.

ajwid01

That's marvellous news!!

Just what I was after. I've sent you an additional 'Thank You' to join the vast numbers you've already received. :-)

Many thanks for taking the time to clarify that for me.

Sounds like I'll be signing up an IPP a.s.a.p., as soon as I find one that looks reasonable.

:j

ajwid01

Hi,

I finally got around to applying for an IPP with 'Antinsurance' last night, but then got put off when I started reading some of the small-print.

They have some sub-sections relating to 'Pay In Lieu of Notice', some of which relates to the 'gardening-leave' type of scenario, but they also EXTEND this to include any other compensatory payments made to you under a company's 'Redundancy Policy'.


So in my scenario:

I am under a 2-month notice period.

If I was made redundant, and allowed to leave employment within the first 2-months, this would be classed as the 'gardening leave', and the policy would not cover me for that 2 months.

However... my company's redundancy policy states that I would be entitled to a tax-free lump-sum 'redundancy payment' equating to 1 month of salary per year of employment.

I have clarified with 'Antinsurance' this morning, and they DO offset these payments against any funds made available to you under their policies.

Apparently, they would divide the 'lump-sum' redundancy payment by the 'usual' monthly salary I would have received had I continued to be employed, and they class this as "earnt income".

BANG goes my plan of potentially using this money to pay of some debts, and then more realistically being able to survive from the proceeds of this policy for a while (if the worst happened).

Does anyone know of any policies where this is NOT the case?

I.e. The payouts from the policy would NOT be offset against any Company redundancy payments (other than [proper] pay in lieu of notice)?


T.