Your finances after... redundancy

Being made redundant is a common occurrence in such straightened times, but there are things you can do to minimise the impact of such a difficult situation.

Figures from the Office of National Statistics reveal 43% of people who left a job last year did so because of redundancy.

In 2012, things haven’t got any easier, with the Chartered Institute of Personnel and Development (CIPD) saying companies were cutting workforces because of trouble securing bank loans and a lack of demand for products and services.

In a CIPD survey of 1,000 employers, more were planning to cut staff than hire them and the net balance of employees was -8.

If you are unlucky enough to join the ranks of the 2.67 million people in the UK who are unemployed at the moment, you can make sure you safeguard your financial future, and that of your family, by being sensible about your money.

Using your pay-off wisely

Ian Smith, managing director of independent financial advice firm Central Financial Planning in the West Midlands, said if you are confident of being placed in another position very soon then redundancy money could be a nice nest-egg for you.

You could invest the money or put it into your pension. Smith said some people even use the cash to fund a start-up a business of their own.

This could explain the surge in self-employed people at the beginning of the year. Those claiming to be self-employed rose 89,000 in the first three months of 2012 to 4.16 million, taking the total to the highest it has ever been since records began in 1992.

However, Smith warned against rushing to spend the money.

‘Redundancy monies are probably best left and only invested when a new job or business is established, or if retirement is to be taken,’ said Smith.

‘In the short term the money may need to be held in cash to cover living expenses plus cover any lost employee benefits.’

Review your benefits

When you lose a job the loss of the monthly salary is what makes the most obvious impact, but Smith urged anyone who has been made redundant to look at what other benefits they received from their employer.