23rd May 2024

Redundancy and your Pension
Being made redundant can cause financial hardship but for others it can help them boost their pension savings.
• A redundancy payment can be made up of the actual redundancy payment and other payments such as salary, holiday pay or payment in lieu of notice.
Can a redundancy payment be used to boost my pension savings?
Potentially, yes, though only the part of a redundancy payment over the tax- exempt threshold of £30,000 counts as relevant earnings. Tax relief on your contributions are restricted to the higher of £3,600 or 100% of earnings.
Can I pay the whole redundancy payment into my pension plan?
A redundancy payment can be made up of the actual redundancy payment and other payments such as:
• salary
• holiday pay
• bonuses
So, to pay the full redundancy payment into your pension you need to have enough relevant UK earnings from a source other the redundancy payment to cover the full payment.
Can you salary sacrifice a redundancy payment?
Alternatively, you can ask your employer to pay some or all of the redundancy payment as an employer contribution. This doesn’t require a formal exchange of letters as it isn’t a salary or bonus exchange but has the same result.
You Financial Pathway
Maybe being made redundant has forced you to think about retirement earlier than you planned and you need to work out the path ahead for your savings now. Have you lost valuable life cover that needs replacing? Maybe, it means another pension pot that needs consolidating for access and control now and in the lead up to retirement? Do you have a flexible financial plan? Is now the time to boost your retirement savings and bring all those other pensions together?
We specialise in cashflow planning for retirement and pension consolidation. We are local and our advice is tailored to you- if you work in tata steel then we will give you the first hour’s advice for free!

Pippa Vaughan-Avery
Independent Financial Adviser
Abacus Assurance
01656 772222