Ask an Expert - Redundancy - February 2011

Redundancy and insolvency

• I am a single parent and my son is 12. At the moment I am employed and earn £13,000 per year which entitles me to Working Tax Credit/Child Tax Credit and Housing Benefit. The company I work for is on the verge of going into liquidation. This means I sometimes do not receive my wages on time and my wages cheque often bounces. I am running the risk that it will suddenly cease owing me money. What are all the benefits that I would be entitled to and how quickly would they come through? (Sarah)
  

  Karen Holmes: If your employer ceases business and you are owed wages you can make a claim to the National Insurance Fund, administered by the Insolvency Service (link opens in a new window). As well as redundancy pay, the fund can cover wages, holiday and notice pay that are due to employees but the employer has been unable to pay. To do this you must first write to your employer asking for the money owed. If this isn't successful then you should fill out an RP1 form (link opens in a new window). You may want to look at the Insolvency Service publication Redundancy and Insolvency: A Guide for Employees (link opens in a new window PDF file size 481kb) for further information. 6 September 2011: Publication no longer available, see Gov.UK - Redundancy: your rights (link opens in a new window) instead.

  If you were unemployed and seeking work you could make a claim for Jobseeker's Allowance. By putting your details into our Benefits Checker you will find out what other benefits you may be entitled to. You may also receive Working Tax Credit for a 'run-on' period of four weeks. This can be arranged when you notify HM Revenue and Customs (HMRC) that you are no longer working. It is not possible to give a guarantee about how long a new benefit claim will take to go into payment, but providing all evidence required promptly will prevent any delay in the process.

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Redundancy and benefit entitlement

• If you take voluntary redundancy are you entitled to Job Seeker's Allowance? (John)
  

  Karen Holmes: You can still claim Jobseeker's Allowance if you take voluntary redundancy. It is not treated any differently than if your employer had selected you for redundancy. You can apply online for Jobseeker's Allowance (link opens in a new window) or call Jobcentre Plus on 0800 055 6688 (Textphone: 0800 023 4888). You can also check for other benefit entitlement by using the Turn2us Benefits Calculator.
  

• My wife has just been made redundant. My income as self employed is £36k pre-tax. Are we entitled to tax credits? (David)
  

  Karen Holmes: Based purely upon the information you have provided your income is too high to qualify for Working Tax Credit but if you have children you could qualify for Child Tax Credit. For an accurate assessment of your benefit entitlement use the Turn2us Benefits Calculator where you can input all relevant personal details.
  

• I have a friend who has been working in the UK for three years. He has recently been told that he could be facing redundancy due to cuts. He is from New Zealand and here on an Ancestral Visa. What is he potentially able to claim in benefits? (Sam)
  

  Karen Holmes: When qualifying for some visas, including the UK Ancestry Visa, you have to show that you can support yourself without needing any help from public funds. People who have the 'no recourse to public funds' restriction on their visa cannot claim most benefits, Tax Credits or housing assistance that are paid by the state. However, 'public funds' does not include benefits that are based on national insurance contributions, such as contribution-based Jobseeker's Allowance. If your friend has been paying national insurance contributions for three years, he may be entitled to this if he is made redundant. People should seek specialist benefits advice when immigration status is a factor. Turn2us have a Find an Adviser tool to help locate a local adviser.

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Help with mortgage when made redundant

• My wife and I have a mortgage in both our names. It is half a repayment and half an interest only mortgage. We both work in higher education and our respective contracts could well not be renewed next year. Would we be entitled to any help with our mortgage if the worst comes to the worst and we are made redundant? (David)
  

  Karen Holmes: If you are both made redundant and are eligible for income-based Jobseeker's Allowance, the means-tested version of the benefit, this can include support for mortgage interest payments but not capital repayment. For new claims there is normally a 13 week waiting period, an upper loan limit of £200,000 and a 104 week limit on the length of time you can receive support for mortgage interest. See Help with housing costs for homeowners. If you are eligible for contribution-based Jobseeker's Allowance only, there is no mortgage support provided within this benefit. To check your possible benefit entitlement, use our Benefits Calculator.
  

• I was made redundant a few weeks ago. Although the redundancy payment and my husband’s income is enough to keep us secure for a couple of months, my main concern is how we’ll cover the mortgage payments if I don’t get another job quickly and the savings run out. (Anon)
  

  Melanie Bien: Hopefully, in telling your lender that you have lost your job, it would be reasonable for them to agree to lower monthly mortgage payments until you have another job or they may agree to a payment holiday whereby you have several months 'off' until you find another job. The lender might freeze the interest you would normally pay during this time, so you don't run up an even bigger debt, or it might not, depending on its terms and conditions. It is the last resort for a lender to repossess a property. What they really want is for you to pay your mortgage, so you need to talk to them to find a solution. It is worth having this conversation as soon as possible.
  

• I was made redundant six months ago. I have found another job but the pay is half what I was earning before and I am struggling to pay my mortgage and other costs.  I don’t want to lose my flat as my little boy is settled in school here so what can I do?  I’ve heard of some Government schemes but don’t really know if I’d qualify. (Sylvia)
  

  Melanie Bien: One option is a Government scheme called Homeowner's Mortgage Support (link opens in a new window). This allows homeowners to delay paying up to 70 per cent of the interest on their mortgage for up to two years. It's designed to help those who are having trouble keeping up with their repayments because their household income has fallen temporarily. You would need to switch to an interest-only mortgage (if you are not on one already) and then the interest you do not pay while on the scheme is added to your outstanding mortgage so you will have to repay it eventually. As such, it is only a temporary situation - suitable if you are confident that your financial situation is going to improve over the next couple of years. Update October 2012: This scheme is no longer available.

  If you would still struggle with these lower payments and need a more long-term solution, the Mortgage Rescue Scheme may be worth a look. With this you will either get a shared equity loan or offered help from a 'mortgage to rent' scheme, whereby a local housing association buys your property and rents it back to you. This is not the same as a sale-and-leaseback scheme, which is offered by private, profit-making companies and should be avoided if possible.

  You should seek specialist advice before making a decision and speak to your lender about the options available.

  For more information, see Homeowners: Help with housing costs

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Redundancy and debt repayment

• I'm being made redundant at the end of March. I'm 23 and am hopeful of getting some work quickly but realise it is tough at the moment. Luckily I live with my parents so I don't have to worry too much about household costs. However, I do have a loan and a few credit cards and there's no way I can cover nearly £200 per month in repayments when I only have Jobseeker's Allowance coming in. Will the bank/lenders be flexible or am I in trouble if I don't find the money, I'd like to know what to expect before I contact them. (Alex)
  

  Simon Read: If you show responsibility towards your debt and propose a repayment plan, most lenders should listen. However, you may not be able to offer them enough to keep them happy. You'll need to work out your budget - how much cash you have to pay towards debts after meeting your essential commitments. If what you propose is too low, then you should get free expert help from any Citizens Advice bureau (use Turn2us Find an Adviser to find your local one) or the StepChange Debt Charity (link opens in a new window). They can help you set up an informal debt payment plan and deal with lenders on your behalf. Crucially they may be able to negotiate a freezing of interest charges and fees so that the debt doesn't continue to grow.

  One thing to think about is any redundancy payment you get. Using the cash to reduce debts can help, but you should pay off the most expensive debt first, which is likely to be credit cards.

  Another bit of advice? Tear up your credit cards so you're not tempted to get further into debt.

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Redundancy and reducing outgoings

• My employer went into receivership on 19th January. I applied for Jobseeker's Allowance and have been offered £65 per week but have found some casual work at a fraction of normal salary but better than £65 per week. The Child Tax Credits office told me that I couldn't claim anything until new tax year as I have earned too much this tax year already. My mortgage company and bank cannot/will not help to reduce mortgage payment or charges now being incurred on account. Any thoughts on how to temporarily reduce outgoings until income recovers would be appreciated. (Warren)
  

  Simon Read: Reducing outgoings is difficult. Where can you cutback? Have a look at all your outgoings and think seriously about what you could do without. Do you have satellite TV, for instance? Switching to Freeview could save some cash. In fact switching other providers could help cut costs, such as your energy firm or phone service. There are comparison websites for all of these where you can input your details and see if there is a cheaper alternative.
  If tinkering with your budget isn't going to help much, then you may need to seek out professional advice to help you negotiate with lenders. The debt charity StepChange Debt Charity (link opens in a new window) has a 'Debt Remedy' feature on its website which takes 20 minutes to complete, but could point you in the right direction. The trained debt counsellors can negotiate with your bank or mortgage company if you are experiencing real difficulties and may be able to persuade them to let you take a short payment holiday or freeze interest charges to help you through some difficult times.

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Redundancy and pensions

• I was due to retire in five years after 30 years in my current job. Unfortunately, chances are redundancy is now on the cards as the company is struggling. My question is what will happen to my final salary pension if my employer goes bust. Will I still get it all? Some of it? (Alan)
  

  Simon Read: A final salary pension scheme is based on the number of years you've worked at the company and your salary at retirement, or when you leave if earlier. So if you were made redundant now, your payouts will be based on your salary now.

  What will happen to your pension if your firm goes bust? It should be protected by the Pension Protection Fund (PPF) link opens in a new window).

  However you may have a decision to make if you're made redundant now and your firm is fine - retire early and take your pension now or you could simply leave your pension with your employer until you do retire. If you get a new job you may be able to transfer your pension into the new company's scheme or your pension contributions into your own personal pension. However, it is likely to be best to leave your contributions in the scheme, as taking them out will mean losing some of the benefits.

• I've been with my employer for just over a year but there is talk of restructuring the department I work in and possible redundancies. If I'm made redundant what happens to the pension scheme I've been paying into via my wages, I've only been paying into it for 9 months, has this money been wasted? (Caroline)
  

  Simon Read: It's not wasted as you should get the cash back. Normally if you have been a member of your company's pension scheme for less than two years and you are made redundant, your pension rights are cancelled and your contributions are returned to you. However you won't get any contributions made by your employer returned to you and your refund will have tax deducted from. It might be a good idea to use the cash to start a personal pension.

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Redundancy and support

• For the last eight years I have worked in the voluntary sector, providing help and support to those in need. For the last year I have been on a short term contract that ends next month as there is no funding to continue the post. We had to go to a debt management company to sort out our unsecured debts. I am now worried about our mortgage. We had Payment Protection Insurance (PPI) on the mortgage but cancelled it because we could not afford to pay it. I know the first course of action is inform the mortgage company, I know I will be able to claim benefits but I have never been unemployed and this is all alien to me. I wish there were support groups locally that could provide moral support and people to share your experiences. (Kirk)
  

Melanie Bien: You will need to speak to your lender but before doing that, you should find out exactly what benefits you are entitled to. You can use the Turn2us Benefit Calculator.

Karen Holmes: As well as checking your benefit entitlement, you may wish to use our Grants Search database to see if you are eligible for help from a charitable fund, based on your personal circumstances, background and needs.

Though we don't have details of your local area there are online communities for those experiencing unemployment such as JoblessJoe (link opens in a new window), which aims to be a positive and supportive community for discussion as well as having resources for finding work. Here you may be able to communicate with others in a similar position.

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Grants for qualifications

• I was made redundant in August last year. The jobs I apply for seem to require a certain qualification so I think it necessary to get this to vastly improve my chances of employment in the near future. I receive Jobseeker's Allowance but that is all. The cost of the course is £2000. Would there be a grant to help me pay for the cost? (Amanda)
  

  Karen Holmes: The Turn2us Grant Search tool helps you search a database of over 3,500 charitable funds and refine your search by set criteria, for example, your personal background, location or the specific help required. By searching under the criteria of 'course fees' 177 results are returned. Every fund has a different purpose and eligibility criteria - some depend on the course or the institution, others on your location. Why not use this tool to see if you are eligible for any of the grants. When it comes to grants and assistance from the Government, such as the Adult Learning Grant, see the Gov.UK information on adult learning (link opens in a new window).

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Top tips for managing redundancy

Further Help

• Turn2us information on Benefits for people who have lost their job and Losing your job through redundancy
• The Insolvency Service publication Redundancy_and_Insolvency:_A_Guide_for_Employees_(link_opens_in_a_new_window_PDF_file_size_481kb)
• Useful links on Debt
• Universal Jobmatch (link opens in a new window)
• Self-help website Jobless Joe (link opens in a new window).

Disclaimer:

The opinions expressed are those of the expert only. The answers and associated material are for general information only and do not constitute financial, legal or other form of advice. You should not rely on this information as an alternative to financial, legal or professional advice from a qualified professional for your own particular situation. The answers are given in response to specific questions submitted by other users. You should not rely on this information alone to make (or refrain from making) any decisions.

Whilst effort has been taken to ensure the accuracy of the information, Turn2us does not accept any liability for this information. It is the responsibility of users to check the accuracy of relevant facts and opinions given as part of any answer before entering into any commitment based upon the information given.

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Date of publication:

Updated: 20 November 2012