Early retirement settlement package
Discussion
Hi All,
The company I work for is undergoing a reorganisation early next year. This involves reducing the number of senior roles, and I'm aware that I don't appear on the new organisation charts.
This is not disastrous, as I would have liked to retire next year anyway, IF I could comfortably afford to do so. At present, I wouldn't get the level of income I'd like from my pension alone, so it's only feasible if the company effectively pays me to go away. I'm expecting to be invited in for a chat sometime in Q1 2021, to discuss a package. The company is not doing this via an HR1, just individual settlements, so I guess it's not technically VR.
All of the people I've known who've had VR in the past have been paid 3 weeks for every year, up to 26 years max. I've been there longer than that, so that's 1.5 years pay.
In addition, although my notice period to the company is 3 months, their notice period to me is 9 months, so if I actually depart before the 9 months is up they'd have to pay some months in lieu of notice. Taken to extremes, if they want me to go quickly, it could be 9 months salary.
The sum of the above could be approaching £250K, which would be very nice, but have I missed anything? Does that sound right? Am I right in thinking that it's as simple as adding the 2 numbers together, and that there's no interrelationship between the two?
Any advice/confirmation would be appreciated.
The company I work for is undergoing a reorganisation early next year. This involves reducing the number of senior roles, and I'm aware that I don't appear on the new organisation charts.
This is not disastrous, as I would have liked to retire next year anyway, IF I could comfortably afford to do so. At present, I wouldn't get the level of income I'd like from my pension alone, so it's only feasible if the company effectively pays me to go away. I'm expecting to be invited in for a chat sometime in Q1 2021, to discuss a package. The company is not doing this via an HR1, just individual settlements, so I guess it's not technically VR.
All of the people I've known who've had VR in the past have been paid 3 weeks for every year, up to 26 years max. I've been there longer than that, so that's 1.5 years pay.
In addition, although my notice period to the company is 3 months, their notice period to me is 9 months, so if I actually depart before the 9 months is up they'd have to pay some months in lieu of notice. Taken to extremes, if they want me to go quickly, it could be 9 months salary.
The sum of the above could be approaching £250K, which would be very nice, but have I missed anything? Does that sound right? Am I right in thinking that it's as simple as adding the 2 numbers together, and that there's no interrelationship between the two?
Any advice/confirmation would be appreciated.
Thanks; that's what I'd assumed. It just seems quite a lot (not complaining though). Given that there are a few of us in this situation, and the 3 weeks per year of service is well above the statutory minimum, it'll be interesting to see if they try to peg it back. Hopefully there's enough precedent been set by other people in the past to get around that.
If the company were to make you redundant and mess it up the statutory cap is circa £88k. It doesn't make a lot of commercial sense for a company to lay you £250k.
The tax on that amount will also be a lot. You might find it makes more sense to pay a big chunk into your pension and get some tax relief.
The tax on that amount will also be a lot. You might find it makes more sense to pay a big chunk into your pension and get some tax relief.
How old are you? That could affect pension accessibility, although good plan to stash money in there *if* you can access it and *if* you won't fall foul of the lifetime allowance.
You'd be best having a chat with someone. Intelligent Money will, I believe, offer you this free of charge and regardless of whether you have money with them.
Remember also that your disposable income requirement if you're not working could be reduced a fair amount quite easily.
You'd be best having a chat with someone. Intelligent Money will, I believe, offer you this free of charge and regardless of whether you have money with them.
Remember also that your disposable income requirement if you're not working could be reduced a fair amount quite easily.
My old man was in a similar position many years ago. I know things change but as well as the redundancy payment, lieu of notice payment you could legitimately ask for an enhanced pension bearing in mind you have to retire early, which will mean less in the pot and less income. So maybe you need to do a calculation as to your retirement income leaving today v your normal retirement age and add that in. My old man was able to claim his full pension at 55 that he would have got at 65 due to payments into the pension fund . He also got a not dissimilar amount in cash, but this was many years ago!
Edited by Dynion Araf Uchaf on Monday 21st December 08:16
My company closed a facility some years back. Anyone approaching pension age was given paid for financial advice. Most used the advisor the company provides, some had their own and had that paid for. There was also a top up to the pension so that anyone over 55 (min age for pension) who retired with 20 year service was treated as full pension.
I would suggest looking at the pension documents and see if there is anything that jumps out. A stand alone AVC may be worth looking at.
Professional advice is a must as there are big numbers on the table.
I would suggest looking at the pension documents and see if there is anything that jumps out. A stand alone AVC may be worth looking at.
Professional advice is a must as there are big numbers on the table.
Thanks very much all. I'm particularly interested in finding out more about Welshbeef's comment regarding previous years. I will definitely be seeking expert advice. I'm 61 at the moment, so it's not a bad time to go if everything works out OK financially.
It's this kind of thing that makes PH so good; there's just so much knowledge out there!
It's this kind of thing that makes PH so good; there's just so much knowledge out there!
Take the first 30k of the redundacy in cash. Put the rest of redundancy money into your pension. If your company have some sort of of pension matching payment then you might get even more cash. Tax is paid when you draw money on your pension not on what you put in. Keep within the 20% tax rate per year.
speedyman said:
Take the first 30k of the redundacy in cash. Put the rest of redundancy money into your pension. If your company have some sort of of pension matching payment then you might get even more cash. Tax is paid when you draw money on your pension not on what you put in. Keep within the 20% tax rate per year.
Don't put a single penny into your pension until you've worked out (or been told) how close to the lifetime allowance your pension fund is.From the figures mentioned, it's more than possible that you've already exceeded it.
S7Paul said:
Hopefully there's enough precedent been set by other people in the past to get around that.
Be very careful with that presumption, there is no requirement for them to meet any past parameters they may have used in calculating severance payments, and you would have no recourse to challenge them if they did peg it back as long as they are operating at or above the minimums required by law.Like anything financial, the past is rarely a guarantee of what we may get in the future.
dibblecorse said:
Be very careful with that presumption, there is no requirement for them to meet any past parameters they may have used in calculating severance payments, and you would have no recourse to challenge them if they did peg it back as long as they are operating at or above the minimums required by law.
Like anything financial, the past is rarely a guarantee of what we may get in the future.
Yes, that's one of my concerns, and it would be naive of me to think that 45 years service would necessarily count for much these days.Like anything financial, the past is rarely a guarantee of what we may get in the future.
Some good points made above re: use of AVC/pension contribution including c/f allowance to reduce tax liability, as the numbers involved puts you in the top 45% income tax band.
Worth checking if your Company provide a regulated financial advisors as part of severance package as they can provide invaluable
holistic financial planning advice. You are doing the right thing to explore the options now and take up any free advice, but personally for the sums involved (and your future!), I would favour a regulated advisor / financial planner. All advisor should act in your best interest, but you have legal protection if you ever receive poor advice and suffered losses from a regulated advisor. If you acted based on the "advice" from the free / non regulated advisor (who are working for free so they want something in return / flog you their product..), you have little or no protection if you followed their poor advice and suffered losses.
Worth checking if your Company provide a regulated financial advisors as part of severance package as they can provide invaluable
holistic financial planning advice. You are doing the right thing to explore the options now and take up any free advice, but personally for the sums involved (and your future!), I would favour a regulated advisor / financial planner. All advisor should act in your best interest, but you have legal protection if you ever receive poor advice and suffered losses from a regulated advisor. If you acted based on the "advice" from the free / non regulated advisor (who are working for free so they want something in return / flog you their product..), you have little or no protection if you followed their poor advice and suffered losses.
Edited by chip* on Thursday 24th December 11:11
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