Green Shoot growing between crack in pavement

Out of Adversity comes Opportunity


The words ‘redundancy’, or in some firms these days ‘organisational redesign’, around a workplace will almost certainly cause trepidation and apprehension, or maybe even fear at the thought of uncertainty. As an employee, you may worry about the challenge you might face trying to regain employment, or the changes you would need to make to your budget or lifestyle which could occur as a result.

Benjamin Franklin once said ‘out of adversity comes opportunity’. In reality, whilst for most people there will certainly be short term hurdles which need to be addressed, there can be, for many people, opportunities to move forward and grow. Redundancy can sometimes provide the much needed push to make the changes to your lifestyle, career, retirement or ambitions you may have long thought about but have put off for one reason or another.

Clearly everybody has different circumstances, and this impacts how people react to this situation. Whilst for most people this will be a stressful situation, it is important to reflect on how you address this significant change and life event and indeed, how you move forwards. 

In our experience, there are some key considerations to help process what is happening and make a smooth transition into your desired path.

What is the next step?

You will need to decide what your next step will be, whether that is a change of occupation, or even opportunities for self-employment, a career break, retirement or simply to find a new job that is similar to your current one. This helps to focus your mind as to what you need to do next to achieve this. For example, if you change occupation, what is your ambition? What additional training, qualifications, will you need and how much will it cost? Do you have enough money to budget for this? Who do you need to speak with to seek employment in this sector?

However, if you are around the age you may wish to retire (or semi-retire), the questions you may ask yourself will be different, for example, do you have enough to live on? How will this impact your plans? What help and support is available to help me with this?

The key here is to take time to reflect on your next course of action, and seek some support and counsel before making any rash decisions.

Budget – First thing is to check what payment you will actually receive

Usually the first £30,000 of a redundancy payment is paid free of income tax, however, anything in excess of this may create an income tax liability.  For example, should your pro-rata earnings for the year be £50,000 and you receive a redundancy payment of £40,000, the first £30,000 out of this would be tax free, however, the remaining £10,000 would push your total earnings into the higher rate tax threshold and would be charged at 40%, thereby, in this example, creating an immediate tax liability of £4,000.

Once you know what the payment is, you will need to look at your outflows and budget for the short term i.e. money in versus money out = surplus or deficit. If there is a deficit you may wish to contact The Citizen’s Advice Bureau to seek advice on debt management or payment arrangements, or you could seek guidance and information on The Money Advice Service website.

If there is a surplus, you may wish to consider some of the options and opportunities available to you.  

What can I do with the surplus money that I won’t need in the short term? 

There are various options available and the route selected is dependent upon what stage of life you are at and what your overall objectives are.

Typical questions asked by clients are:

  1. Should I keep it in cash or given low interest rates are there any other options?
  2. Should I repay my mortgage/debt?
  3. Can I contribute some of this in to my pension?

Out of the above questions we commonly also get asked the following question; ‘is there any way I can save some money on tax?’ Should it be appropriate for someone to opt for the pension route, the answer to this question is typically ‘yes’, as of course you receive tax relief on money which you put into pensions. Should an individual contribute £10,000 into a pension, they would receive tax relief on this contribution and it would be uplifted to £12,500 immediately.

Furthermore if they were a higher rate tax payer an additional 20% tax relief on the £10,000 can be reclaimed upon completion of a tax return, taking the effective cost of this contribution to £8,000. This could be even more efficient if the contribution was made via salary sacrifice, which can often be considered by seeking financial advice to help support you through this situation.

Clearly dealing with such a significant change and life event as redundancy can be daunting and all sorts of thoughts and emotions will be going through your mind. It is therefore really important to take advice from all sources, including personalised financial advice from an adviser with empathy and experience of supporting people in this situation, and who will act as your trusted adviser. Everybody’s circumstances are different and therefore a one size fits all approach will not work. 

At Armstrong Watson, our quest is to help our clients achieve prosperity, a secure future and peace of mind. We have significant experience over many years of dealing with clients in this situation and providing them with the support and advice to help guide them through this significant life event and period of change.


If you are facing redundancy, or you'd like to speak with Simon about your options, please call on 01132 211392 or email by clicking on the link below.

Contact Simon