Earlier this year the chancellor, Rishi Sunak, announced the extension of the Coronavirus Job Retention Scheme. More commonly referred to as the “furlough” scheme, it has supported over 11 million jobs during the pandemic.
The scheme provided support to businesses affected by coronavirus lockdowns, allowing companies to retain staff through a government grant of 80% of an employee’s salary, up to a monthly cap of £2,500.
The most recent government figures confirm that as of 31 May, about 2.4 million UK workers were on furlough (compared to a peak of over 5 million in January). About 30% of employers had staff on furlough, down from 35% at the end of April.
Originally designed to reduce the worry of redundancy for staff unable to work during lockdowns, the scheme has been extended to 30 September, but changes will be phased in over the next few months.
The help offered to companies is reducing
The rules have changed several times since the scheme was introduced, with different levels of help provided by the government and changing expectations for employers.
As the scheme begins to wind down, the rules are set to change again.
In July, in a change to the previous scheme rules, the government will pay 70% of employee salaries, with employers expected to pay 10%. From 1 August, and then up to the scheme closing on September 30, the government will pay 60% and employers will pay 20%.
The monthly limit of £2,500 remains in place and the rule changes shouldn’t alter furloughed workers’ take-home pay. The move is expected to encourage employers to bring their staff back full-time, but, for many, worries of redundancy persist.
The threat of redundancy remains but Future Planning can help
Redundancies peaked in the third quarter of last year. The Office for National Statistics (ONS) confirmed redundancies hit 370,000 in the three months to October. Rates have fallen since the country began to reopen.
The threat of losing your job can have a massive impact on your health as well as your financial security but having a plan in place can make a real difference.
At Future Planning, we can put a long-term retirement plan in place for you that is based on a holistic view of your overall financial position. It will also include protection against a change in circumstances, such as a job loss or ill health.
Here are some things to consider if you are worried about the prospect of being made redundant.
1. Stay calm
The most important thing is not to panic but to take a step back and view your financial position as a whole. Ask yourself these important questions:
- Do I have enough to live on? And for how long?
- Can I still support my family?
- What do I want to do now?
If you have enough savings to live on in the short term – or you have received a sizable redundancy package – then you have time to take stock.
We can use cashflow modelling and other tools to help you decide whether you have enough money set aside to consider early retirement or whether you should consider going back to work. You might find you can use your savings and redundancy pay to supplement other income and return to employment on a part-time basis or begin taking a phased retirement.
Even if you find that you have a shortfall, avoiding knee-jerk reactions and emotional decisions now – such as cashing in investments or stopping pension contributions – could make a huge difference in the longer term.
2. Think about your next steps
We can help you manage the income and savings you have. Talking to us might mean that you can retire earlier than planned. If this is the case, start thinking about how you plan to spend your retirement and the kind of lifestyle you might be able to afford.
If full-time retirement isn’t right for you just yet, supplementing your income through part-time work might be an option. It could allow you to live an even more comfortable lifestyle while giving you a social outlet and an increased feeling of purpose.
If you find that you have a pension shortfall and need to return to work, think about the type of job you’d like to do. You might have valuable skills built up throughout your career, that are still in demand. Equally, you might want to start a new career.
Age UK confirmed recently that the number of self-employed people aged 65 and over has more than doubled in the past five years. There are risks to starting your own business later in life but it could be massively rewarding too.
3. Make the most of your redundancy payout
Paying your future self first is an important part of retirement planning. If you have received a redundancy payout you will likely need to use some of this for day-to-day expenses in the short term. Consider putting some of it into pensions or investments such as ISAs too.
Both are tax-efficient ways to manage a sudden lump sum and they could help you to retire sooner than you originally planned.
Get in touch
The last 16 months have been challenging for many. Along with the threat to health caused by the pandemic, lockdowns have left many people struggling financially. The threat of business closures and redundancies remains.
Having a financial plan in place – and the expertise of a financial professional to review these plans and ensure they stay on track – can make a real difference if the worst should happen. It can also provide reassurance and peace of mind.