There is no doubt that the 2020 pandemic has made a lot of people worried about their financial situation.
In many cases, this is due to a considerable number of people having been put on furlough, being made redundant, or have lost their jobs due to the effect COVID-19 has had on our economy.
When things like this happen and you’re facing redundancy, or perhaps looking at early retirement, it's important to be able to seek expert advice in order to gain a foothold in your financial position.
This article will look to cover some of the reasons why it's so important to get the right advice during times of redundancy or job loss. It will also seek to provide you with some useful information on what you can start doing to feel in control during unsettling times.
Redundancy - a motivator for retirement
At Applewood Independent Ltd we have seen a large increase in our existing clients who have decided that now is the time for them to retire.
Having been at home for a while on furlough, or perhaps having been made redundant, they have asked us to structure their portfolio in a way that gives them enough income so they can take on a relaxed, early retirement.
Even though they are retiring early, they still want to live their life to a certain standard and so we must look at a way of managing their investments and pensions to provide them with that same quality of life.
And it's not just with our existing clients either.
More and more, we have started getting a lot of enquiries from people who are looking to make the same switch. Some, due to age or experience, don’t want to find a new job. Others have just enjoyed being at home so are looking to retire either partially, or full time and enjoy the rest of their lives.
This is when an independent financial adviser is worth their weight in gold.
Let's explore why.
Pensions – the smooth transition into retirement
When facing redundancy, it's important to understand the need to take financial advice on your specific situation, especially when it comes to pensions.
Most people we have worked with have not just worked for one firm over their careers, therefore, will not just have one scheme. I have seen as many as eight different pension schemes that an individual has been paying into since the start of their career. And that takes a lot of work to keep organised.
Those pensions all need to be allocated correctly so they are serving you best and this can differ from person to person. Does it need to be left where it is or do you need to move it into something more personal? Perhaps it can be transferred to a new employer if you find a new job?
That’s where a good independent adviser will provide help to you. They can assess all the options and aim to build a flexible retirement plan that will give you the income you need to enjoy your life without worrying about redundancy and what will happen once that inevitable phone call comes.
But it’s also important that these retirement funds have the potential for growth on that capital as well. A good independent adviser will know how to keep your pension fund working hard for you by building a plan with good growth potential for years to come.
But it’s not just the pension schemes that we need to look at when facing redundancy.
A growing pot for the future
If you have an existing investment portfolio already or perhaps a lump sum from a redundancy package, it's important you are making that capital work as hard as it can for you.
For instance, if you have been recently made redundant and have a substantial amount of redundancy pay to invest, it's always worth looking for advice as to what you should do with those funds. In many cases, the choice depends on employment status.
Let’s say you have the opportunity to go into a new job and don’t need those funds to live off. Then, there is a great potential for investing those funds to grow for the future. It can be a very nice growing pot that can help massively when you finally do reach retirement.
It’s important to note at this stage that everyone’s financial position is different. If you are in a position where you have acquired a new job after redundancy then you will be using your funds slightly differently than someone who is looking at retiring directly after being made redundant (as explained above).
But being employed or not, a post redundancy financial plan that is tailored and specific to your situation is important to have and it's key you start to think about it if you are facing redundancy or already in it.
Debt reduction - protecting yourself
So what are some things you need to consider when making these plans and how can you begin to protect yourself financially against redundancy and job loss?
Well firstly, if you have been made redundant the most important thing to consider before looking to invest those funds is debt reduction. For those who do have debt; credit cards, loans, and mortgages for example, it’s important to first focus on these. By doing so it will reduce your monthly outgoings and is a very good first step for financial planning.
And now is a great time to start reducing debt as I think a lot of people have been able to save a great deal of money during the last six months.
With trips away cancelled and the limitations on the opening hours of bars and restaurants, a lot of our leisure expenses have been avoided. This provides a good opportunity for people to use some of those saved funds to begin to start reducing debt. If you can, you will be in a good place to start protecting yourself should you be made redundant now or in the future.
A nudge in the right direction
Of course, everyone’s situation is going to be different. Some of us have a lot more debt than others and it’s unfair to adopt a generic approach to offering financial advice.
Most people just need a nudge in the right direction. Many know what the right thing to do is but for some reason avoid doing it, look at writing a Will as an example. You know you should but many people, for one reason or the other, don’t ever do it.
This is also true for pensions and financial planning. So if you are facing redundancy, and haven’t already started to make a plan for the future, get in touch with an independent adviser and start protecting yourself now.
I hope this has been useful.
If you have any questions about redundancy feel free to give us a call on 01270 626 555 or email us at email@example.com. We would love to hear from you.
More to come next week.
The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article, or alternatively contact the Applewood Independent Ltd office on 01270 626555.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
Your capital is at risk, you may get back less than you originally invested.
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits.
Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.