Having a financial plan or seeking out a financial advisor is not the first thing to enter people’s minds when facing redundancy. A feeling of shock or exasperation is sharply followed by figuring out the finite details of the redundancy process and, in effect, what your entitlement is.
We know that the Covid-19 pandemic has changed the employment landscape and more of you are, unfortunately, having to take compulsory or voluntary redundancy.
At Godiva Wealth Management our aim is to help navigate you through this, often stressful and difficult period in your life.
It’s important to seek professional help. Talking to a financial advisor can help manage your financial expectations and smooth out the bumps in the road.
Through a few simple steps we will assess your financial requirements and look at carving out investment advice that best suits your goals.
First things first, it’s important to note that a redundancy lump sum is not exempt from tax. Having spoken with previous recipients of redundancy pay-outs many were taken aback when having to pay tax on their money and had not taken into consideration the amount of tax they had to pay. The tax-free threshold on a redundancy payment is set at £30,000. The tax on any amount over this threshold is set at your marginal rate of tax. There are ways to off-set this tax on a redundancy payment. One of the most common ways to do this is to make an additional pension contribution. Our financial advisor is on hand to talk you through this in more detail.
We use something called Cashflow Modelling. Simply put – it can calculate how much money you could have in the future and whether you are on course to hit your life goals. For example, It can help calculate whether retirement is an option. Or throw up any potential shortfalls in your finances; In a way, it’s a forensic look at your assets and outgoings (present and future).
The way it works: A financial planner will take all of your assets, including pensions, investments, and your redundancy package, into consideration alongside any outgoings, such as a mortgage or school fees or even one-off payments.
Your financial advisor will then crunch the numbers to give you a long-term projection of your finances. From this we can do a couple of things. If for example, the redundancy pay-out – although unexpected – has helped you to consider early retirement as a viable option then we can map out a course of action that ensures this is the case. Or it may be that redundancy has set you back and a reassessment of financial and life goals is required to get you back on track. The aim of this independent financial advice is to assess your objectives and align them to realistic and achievable targets.
For many, the cashflow model shows it maybe an option to put your redundancy payment into an investment. Often following a redundancy, making informed decisions about your finances is of utmost importance; thinking about investing given the current economic circumstances could be the right time to enter the market. It can, however, be quite difficult to judge this so seeking financial advice from a professionally qualified financial advisor is the best course of action.