Redundancy: a money triage plan

Step 1: Know what you're owed

Before any planning, pin down the numbers. A redundancy package typically stacks several elements with different rules:

Use the GOV.UK redundancy pay calculator to check the statutory element, and ACAS if anything about the process itself looks wrong — consultation requirements, selection fairness and settlement agreements are employment-law questions, and a settlement agreement legally requires independent advice (the employer usually pays a contribution for it).

Step 2: Build the runway before anything else

Every other choice depends on one number: how many months your essential outgoings are covered. Work out your essential monthly spend in the emergency fund calculator, divide it into your available cash including the payout, and treat that figure — your runway — as the thing you're protecting. Two immediate moves:

• Park the lump sum somewhere boring and accessible — an easy-access savings account. This is exactly the wrong moment to lock money away or put it at market risk, whatever the payout's size makes tempting.
• Cut the burn rate early, not late — pausing discretionary spending in month one buys far more runway than panic-cutting in month five.

Step 3: Claim what you're entitled to — immediately

• New Style Jobseeker's Allowance runs off your NI record, not your savings — a payout doesn't disqualify you. It's claimable from day one and many people never bother; that's leaving your own NI contributions on the table.
• Universal Credit is means-tested (savings over £6,000 taper it; over £16,000 usually ends it) — but check anyway, especially with children or housing costs. Redundancy pay counts as capital, not income.
• Council tax reduction and mortgage/rent help are administered locally — ask, don't assume.

Step 4: Protect the commitments

• Talk to your mortgage lender before missing anything. Lenders have hardship options — payment holidays, interest-only periods, term extensions — that are far more available to people who call early. Model what a term change does with the mortgage calculator.
• Check policies you already own. Some income protection and mortgage payment protection policies cover redundancy — read the schedule before assuming either way.
• Don't cancel protection insurance reflexively — life cover bought years ago may be irreplaceably cheap. Cut discretionary spending first; see protection insurance explained.

Step 5: The pension questions

• Leave the pension alone. A redundancy crisis is the classic trigger for raiding a pension early or falling for a "pension release" scam — cold calls about pensions are illegal, full stop. If you're 50+, take the free Pension Wise session before touching anything.
• Your old workplace pension stays yours. Nothing happens to it when you leave; note the provider and log-in before you lose access to your work email. Whether to consolidate later is covered in pension consolidation.
• A sophisticated option worth knowing exists: some employers will pay part of a redundancy package above the £30,000 tax-free limit into your pension instead ("redundancy sacrifice"), avoiding income tax and NI on that slice. It has to be agreed before termination and interacts with allowances — a genuinely good one-off question for an accountant or FCA-authorised adviser.

Common questions

About this guide: general education only — not regulated financial advice, tax advice, legal or employment advice, and FinancialAdvisor.co.uk is not an FCA-authorised firm. Payout structures, benefits and tax treatment depend on circumstances; verify figures on GOV.UK. For decisions about your own money, consult an FCA-authorised adviser.