Redundancy

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Redundancy is the Biggest threat to many people today

Redundacy is the biggest threat to many people today.The current downturn in the global economy has created an environment of ever increasing level
of threats to all of us. These threats are often outside of your control and therefore there is little or
nothing that you can do to stop them affecting you. However the degree to which these threats affect
you can be limited by taking ownership over the factors that you can control.

Identifying the threats to your Personal Economy is the first step in taking more control. For example
one of the biggest threats to many people today is the threat of redundancy.

Given the fact that we cannot control a redundancy, what can you do to manage your finances through
this threat?

The first thing that you can do is to act now and look to protect yourself against the threat of a
redundancy. At present, there are policies available that can provide you with a replacement income
in the event of an involuntary unemployment. There are also products, such as mortgage repayment
protection, that can cover your mortgage repayments in the event of redundancy. These products do
not pay out indefinitely but can help you to manage your way through a potential cash flow crisis in the
initial periods after redundancy.

Obviously there is a cost involved in taking out one of these policies so it is important to identify how
this cost may affect your current cash flow position, however, this kind of protection can help you get
through the initial stages of your redundancy and allow you the financial freedom to plan for the future.
In turn, by limiting the immediate effects on your cash flow, it can give you an opportunity to reassess
your career path and may also allow you the opportunity to re-skill for a new career.

If it is too late to protect yourself against the threat and you are faced with the reality of a redundancy
you need to understand all of the implications this has on your Personal Economy so that you can plan
the road ahead.

The tax treatment of a redundancy payment is the first area that you need to manage and control

The tax treatment of a redundancy payment is the first area that you need to manage and control.
There are a number of reliefs available to you on a redundancy payment which can help reduce the
amount of tax that you pay. The relief option that you choose is not always a straight forward case
of selecting the largest relief as in some cases you may be waiving your rights to a tax free lump sum
from your pension on retirement. So although you may receive more now, you may be forfeiting a lot
more in the future. Therefore, selecting the appropriate relief is vital and it is important that you take
independent advice to ensure that the right decision is made.

There is also a further relief called Top Slice relief that is available to you in the year of redundancy.

Many people tend to overlook this relief due to that fact that you can only claim it at the end of the tax
year. In many cases, by not claiming Top Slice relief people can miss out on substantial tax rebates. This
is valuable money needed to help you financially following a redundancy and could be lost if you do not
know how to claim it back.

The next area that must be looked at in the event of redundancy is the area of your pension. If you have
been in pensionable employment for a number of years, it is likely that you have built up a substantial
pension fund within the company pension scheme. This is a valuable part of your Personal Economy and
it is therefore vital that you make the right decisions in relation to this.

The event of redundancy can often result in an opportunity for you to take ownership and control of
your pension fund. In certain circumstances, it is now possible to take ownership of the fund that you
have built up within the company pension.

Ownership in this case does not simply mean giving you the ability to choose where your money is
invested pre retirement but also involves the ownership of the money post retirement.

In a typical company pension scheme, owning the pension fund post retirement is not possible as in
most cases you will be forced to buy an annuity or income for life. This involves giving away the fund
that you have built to an insurance company who will pay you a certain amount for as long as you live.
The key unknown in this equation is how long you are going to live?

A Redundancy can present opportunities for you

If, by taking ownership of the pension fund you can keep control of the total value of the fund, you now
open up new possibilities post retirement. It also means that you no longer have to give away your fund
to a third party but can now control and manage your asset in retirement.

By taking ownership of your pension fund you now have the ability to bring another part of your
Personal Economy under tighter control and possibly open up options that would not have previously
been available to you. Many times it can be the event of redundancy that opens up this option for you.

You can now see that even the event of a redundancy can present opportunities for you once you
manage your finances carefully. The key to managing your finances in any economic environment is
to take control and ownership of as many areas as you can. The more areas of your finances that you
control and own, the less of a threat the outside factors become.

If you are faced with or worried about redundancy or any other area of your finances please call
McNamara today and arrange an appointment 01 230 900

Or visit our main website for further advice on redundancy and other information  www.personaleconomy.ie