Commercial Good experience

What happens to your retirement savings if you are made redundant?

Written by Jimmy Rustling

The easing of lockdown levels across the globe have allowed for numerous sectors to open for business. However, COVID-19 infection cases continue to rise, particularly in countries such as the UK and Brazil.

The next few months will serve as an acid test to see the ‘next’ level of the social and financial impact of the pandemic. Since lockdown measures came into effect, many more companies may have had to shut their doors should they not be able to adopt new emergency relief strategies.

If a company faces closure during the COVID-19 pandemic and employees lose their jobs, they should know their rights and responsibilities when it comes to retirement savings. The recent past has shown that some businesses may have acted unethically and decided not to pay their employees’ retirement contributions into funds on their behalf.

In the UK for example, the Pensions Advisory Service confirms that if you are made redundant, you don’t lose your pension benefits. However, contributions can be deferred by the employer, meaning they will cease to be paid, but you are still entitled to the contributed amount when you retire. You also have the option to keep contributing to the workplace scheme or transfer the pension into a new scheme. The Pensions Regulator (TPR) oversees this process.

Furthermore, you may be allowed to use part of your taxable redundancy payment, to make pension contributions. During these uncertain times, companies should be honest with their employees about the current financial state of the business, particularly if it’s in distress.

What happens to your money if you are in a workplace retirement savings scheme?

If you belong to a group retirement annuity, meaning that the employer can administer contributions to your retirement annuity (RA) on your behalf, your investment should continue regardless of the employer’s situation.

Your employer may inform you that contributions will be stopped. In this case, it’s worthwhile to consider setting up a debit order in your personal capacity. Also, if your contributions are paid with post-tax money, you may be able to claim tax back at the end of the tax year.

Accessing your savings

Losing your job can cause you to make emotionally charged decisions. It’s imperative to keep a level head because an impulsive choice may negatively affect your financial stability.

It’s understandable you may be tempted to withdraw your retirement savings; however, it should be an absolute last resort. If you have no other option, try and draw small amounts and start contributing again when you begin another job.

In addition, it’s important to note that access to savings may not be immediate; it depends on the product. For example, if you are contributing to a retirement annuity or pension fund, you can’t access the money until you are 55 years old.

When facing a time of insecurity, it can be vital to think rationally about investment management and preserve your savings so you can enjoy a comfortable retirement.

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About the author

Jimmy Rustling

Born at an early age, Jimmy Rustling has found solace and comfort knowing that his humble actions have made this multiverse a better place for every man, woman and child ever known to exist. Dr. Jimmy Rustling has won many awards for excellence in writing including fourteen Peabody awards and a handful of Pulitzer Prizes. When Jimmies are not being Rustled the kind Dr. enjoys being an amazing husband to his beautiful, soulmate; Anastasia, a Russian mail order bride of almost 2 months. Dr. Rustling also spends 12-15 hours each day teaching their adopted 8-year-old Syrian refugee daughter how to read and write.