Have you lost your job before you are ready to retire? Here is what to do
TL;DR
Being made redundant later in your career can have a significant impact on your retirement plans, but it does not have to derail them. Redundancy payments, pensions, investments, tax, and future employment opportunities all need to be considered together before making major financial decisions. Avoid rushing into accessing your pension or changing your retirement date. With careful planning, redundancy can become an opportunity to reassess your finances and build a more secure path towards retirement.
Facing Redundancy Before Retirement? Don’t Make Important Financial Decisions Too Quickly
Redundancy can be unsettling, particularly if you are approaching retirement. While it may feel as though your long-term plans have been disrupted, redundancy can also provide an opportunity to reassess your finances and make informed decisions about your future. Taking time to understand your options before acting can help you avoid costly mistakes.
Redundancy can have a major impact on your retirement plans. Your income, pension contributions, retirement date and investment strategy may all need to be reviewed. Looking at these together provides a clearer picture of what retirement could still look like.
The choices you make in the first few weeks are often the most important. Decisions about redundancy payments, pension benefits, investments or early retirement can have lasting financial consequences. Understanding the implications before taking action gives you greater flexibility and control.
Pension, tax and investment decisions should be considered together. Rather than viewing each decision in isolation, reviewing your overall financial position can help you make better use of your redundancy package while supporting your long-term retirement objectives.
A Discovery Call can help you understand your options before taking action. Whether you’re considering early retirement, returning to work or simply want reassurance that your retirement plans remain achievable, an independent discussion can help you make confident, informed decisions.
If you’ve recently been made redundant and are unsure how it affects your retirement plans, book a Discovery Call to discuss your circumstances and explore the most appropriate financial strategy for your future.
One of the biggest threats to a well thought out expat retirement plan is losing your job before you are ready to retire.
You have it all planned out. You are hitting your peak earning years. The costs associated with raising children have started to decline. Now is the time to start socking away some serious funds to boost your retirement… and bosh!!!! Out of the blue, you are staring at a P45.
Your employer may have imagined that they can employ somebody younger who has a more up-to-date skill set.
Alternatively, as they look to cut costs, they may look to replace you with a local employee who doesn’t require the additional bells and whistles associated with employing an expat – accommodation for your family, international school fees, regular flights home etc.
A study conducted in December 2018 by researchers at ProPublica and the Urban Institute found that more than 50% of workers experience “an employer-related involuntary job separation” after age 50.
What we will cover in this post
1 Getting back on the merry-go-round can be difficult
2 Check your contract
3 Review your savings and pensions
4 Be aware of the tax implications if you decide to return to the UK
5 Adjust your budget/spending
6 Register for unemployment benefits
7 Evaluate your insurance coverage
8 Rebrand yourself
9 Start a consulting business
10 Work longer than planned, but at a less stressful job
11 Accelerate your retirement plans
12 Conclusion
Getting back on the merry-go-round can be difficult
Then, once you have been let go, getting back into employment can be more difficult than you had imagined.
It is a sad fact that many employers discriminate against those over age 50 – ageism is a thing.
For expats, matters are further complicated when it comes to landing a new role.
- We may have grown too big for similar roles in our home country.
- Our network of contacts to call on has withered as a result of our years spent overseas.
- There is greater perceived risk in employing someone who has been “out of the country” for some time.
- If we have settled in a foreign country and want to find work there, we can be hampered by the fact that we do not speak the local language well enough (we were always too busy to get round to learning it).
- For those looking to stay on, there is also the fact that many multinational companies looking for expatriates advertise at home first as they don’t seem to consider there may be foreign experts on the spot who are employable.
As a result, expats who are laid off later in life face an extended period out of the workforce and, if they are able to find a new job, it may be at a much lower income level (I have friends who in a previous life held high flying executive careers and who are now teaching English as a foreign language).
The repercussions for those who are being let go from a job late in their career can be disastrous financially.
Dipping into one’s savings five to ten years earlier than planned, instead of continuing to save and invest, can lead to very challenging years ahead.
The best approach for this type of undoubtedly frustrating situation is to be proactive. Procrastination can further exacerbate the negative impact on your finances for years to come.
Below is a list of planning items to consider in the unfortunate event that you are laid off late in your career.
Check your contract
After the initial shock of being “axed” has worn off, the first thing to do is check your contract. Much depends on whether you are a local or an international employee.
Although it may seem very obvious to do so, many expatriates in the initial rush of euphoria that accompanies an overseas posting, do not check their contracts carefully enough.
It is essential to pay particular attention to an employer’s obligations at the end of the assignment relating to matters such as relocation responsibilities, repatriation expenses and favourable termination benefits if there is no other job available elsewhere.
Your rights depend on where you have actually been working, whether that country is a signatory to various international conventions as well as the law governing your contract.
Review your savings and pensions
This is a great time to take stock of what you have accumulated so far.
Schedule a time to talk with your financial advisor to understand the income that you can expect from your accumulated investments should you need to start drawing from them early.
Discuss any financial pay-off that you have received as part of your redundancy and how this might affect your financial plan.
Also, review your pensions. What are the implications of starting to take income from any old employer pension schemes (assuming you are already over age 55)? Are there penalties for doing so at your current age?
Can you take any Pension Commencement Lump Sums? [Caveat – if you are not resident in the UK, you should always check the implications with a local tax adviser before doing so.]
It is likely that you will not be able to receive any State Pension yet. However you should factor that into your calculations. You can find out more about UK State Pension for expats in our guide.
By utilising cash flow modelling tools, your adviser should be able to clearly show you the impact of the various scenarios that we will look at in this post.
You will then be able to reassess your investment asset allocation and determine if you need to make lifestyle changes in the event that you are not able to get back to the same income level.
Be aware of the tax implications if you decide to return to the UK
If you decide to return to the UK, such a move has to be carefully planned to avoid adding to your woes by running foul of the Inland Revenue; there are a number of things that can catch you out.
I would always recommend that you talk to a UK qualified financial adviser and a UK tax adviser beforehand.
Adjust your budget/spending
If you were prudent while you were working, you probably have a six-month emergency fund set aside for situations like this.
That’s great, but that six months will fly by.
You can make that emergency fund last longer by reassessing your spending.
There are certain expenses, like mortgage payments, rent, utility bills, and groceries, that obviously can’t be reduced.
However, cancelling your next vacation, refraining from dining out, and postponing the kitchen renovation are all actions that can be taken until your financial future is more certain.
Register for unemployment benefits
When dealing with the shock of being laid off from a long-time employer, one of the first things to consider is claiming unemployment benefits.
This is more complicated for expats. If you decide to return to the UK, you will have to wait till you have been resident for 3 months before you can receive jobseekers allowance.
If you decide to stay overseas, you will have to investigate any eligibility for unemployment benefit in the country in which you are resident.
For reasons of pride, this step may be overlooked by high earners. Don’t let that happen to you.
While unemployment checks may be quite modest compared to your previous earnings, they will at least serve as an income stream to help you cover some basic expenses.
There is no reason not to claim the money to which you are entitled.
Evaluate your insurance coverage
As well as losing your income, being made unemployed will mean losing any employer-sponsored health and life insurance plans.
While the priority will likely be to reduce your financial commitments (see earlier point) it may be necessary to replace these insurance plans.
This is especially the case if you still have children who are financially dependent on you and/or you live in a country that does not have a state-sponsored health system that you and your family are eligible to use.
One option would be to approach the insurance company that provided the cover through your ex-employer and ask if you can maintain the plan yourself.
If this is too expensive or simply not an option, then you will need to look at setting up such insurance independently.
Rebrand yourself
Starting to apply for new jobs is an obvious decision.
However, repositioning your skillset is not always top of mind. One of the reasons older employees may lose their jobs is due to a skillset that is perceived as antiquated.
That being said, after spending several decades in a particular field, you are bound to pick up many things that the 25-year-old rookie who just replaced you does not yet possess.
This includes experience, contacts, industry knowledge, secrets of the trade, and more.
You can leverage these insights (as well as show that you are not a tech-dinosaur) by sharing your knowledge via your own blog or a platform like LinkedIn.
Start a consulting business
The knowledge that you have amassed during years of experience in your field can serve as a valuable resource to many.
One of the smartest moves I have seen from laid-off executives has been to set up their own consulting firm.
In doing so, they stayed active in their field, prevented gaps in their resume, maintained an income stream (even if less predictable), and continued to network with like-minded professionals.
While the transition from a high earning C-suite employee to an entrepreneurial consultant may be difficult, the benefits sure beat spending years unsuccessfully searching for work.
Not Sure Whether You Can Still Afford to Retire?
Being made redundant can make even the strongest retirement plans feel uncertain. Many people immediately question whether they can still afford to retire, whether they need to return to work or whether they should access their pension earlier than planned. The good news is that redundancy does not automatically mean your retirement goals are out of reach.
Redundancy changes your financial picture. Your income, pension contributions and retirement timetable may all need to be reassessed. Understanding how these changes affect your overall financial position is the first step towards making informed decisions.
Your retirement plan may still be achievable. In many cases, reviewing your pensions, investments, redundancy payment and expected retirement income reveals more options than people initially realise. Small adjustments to your retirement strategy can often make a significant difference to your long-term financial security.
Independent financial advice helps you understand your options. Whether you’re considering early retirement, taking pension benefits, returning to work or investing your redundancy payment, reviewing every aspect of your finances together helps ensure your decisions support your long-term objectives rather than simply solving short-term concerns.
A personalised retirement plan removes uncertainty. Having a clear understanding of your future income, expected expenditure and available financial resources allows you to move forward with greater confidence, knowing your retirement decisions are based on careful planning rather than uncertainty.
If redundancy has left you questioning your retirement plans, book a Discovery Call to discuss your circumstances and build a financial strategy that helps you move forward with confidence.
Real People, Real Results
“In looking for a financial advisor, key to me was to be able to feel that the person the other side of the table was trustworthy and would place my interests at the centre of advice.
Ross gave me this feeling the first time we met and the cooperation since then has shown that it is really the case, with excellent support provided throughout the process he has been engaged in.”
— Alan Davies
More TestimonialsWork longer than planned, but at a less stressful job
Changing careers may be a good opportunity to continue earning an income while reducing stress and improving your lifestyle.
For example, if you worked as a regional CEO at a large pharma firm, then switching to a not for profit organization will surely lower your income and you may need to work longer to reach your financial goals.
However, you’d also be trading regularly spending 70+ hours a week in the office for a significantly improved work-life balance.
This strategy may have been unthinkable at your old job, but the ability to think outside the box is essential to not derailing your financial goals.
Accelerate your retirement plans
Depending on the results of reviewing your existing savings, investments and pension plans, retiring earlier than intended may be an option if you have sufficient funds to do so.
If this is not the case but downsizing or relocating were on your list of things to do in retirement, accelerating those plans may provide the cost savings you need in order to comfortably retire today.
Add in the potential savings from lower taxes, not having to commute to work, no longer needing to buy office clothes etc and retirement may become even more realistic.
In any case, meeting a financial adviser to run the numbers and have a conversation about the impact of such a decision is certainly worthwhile. You may even leave the meeting feeling pleasantly surprised.
How Redundancy Can Affect Your Retirement Plan
Being made redundant close to retirement can feel like a major setback, but it doesn’t necessarily mean your retirement plans have been derailed. In many cases, redundancy provides an opportunity to reassess your financial position, review your retirement objectives and make informed decisions that strengthen your long-term financial security. Looking at your pensions, investments, tax position and redundancy package together allows you to build a clearer picture of what comes next.
Reviewing Your Pension Options After Redundancy
Redundancy is an ideal time to review your pension arrangements. Depending on your age and circumstances, you may have options to leave your pension invested, consolidate existing pensions, continue contributing through a new employer or consider accessing benefits if appropriate. Understanding each option helps ensure your pension continues to support your long-term retirement goals.
Making the Most of Your Redundancy Payment
A redundancy payment can provide valuable financial flexibility, but how you use it can have a significant impact on your future. Some people choose to reduce debt, strengthen their emergency savings, increase pension contributions or bridge the gap before retirement. Having a clear financial plan helps ensure your redundancy package works as effectively as possible.
Should You Retire Early or Return to Work?
Redundancy often prompts people to ask whether this is the right time to retire. The answer depends on factors such as your pension income, expected retirement expenditure, other savings and your long-term financial objectives. Reviewing your financial position carefully can help determine whether early retirement is realistic or whether returning to work would strengthen your future security.
Protecting Your Investments During Uncertain Markets
Periods of redundancy often coincide with emotional and financial uncertainty, making it tempting to make sudden investment decisions. Selling investments during market volatility or changing strategy without careful consideration can affect long-term returns. Maintaining a disciplined investment approach usually produces better outcomes than reacting to short-term events.
Reviewing Your Retirement Income Strategy
If redundancy changes your planned retirement date, your retirement income strategy may also need updating. Reviewing how your pensions, investments and other assets will provide income throughout retirement helps ensure your plans remain sustainable and aligned with your lifestyle expectations.
Tax Planning Following Redundancy
Redundancy payments, pension withdrawals and other financial decisions can all have tax consequences. Understanding how these interact may help reduce unnecessary tax and improve the overall efficiency of your retirement planning.
Considerations for British Expats Made Redundant Overseas
British expats may face additional challenges if redundancy occurs while living abroad. Local employment laws, taxation, pension arrangements and future residency plans can all influence your financial decisions. Reviewing your overall financial position helps ensure your retirement strategy remains appropriate across different jurisdictions.
Why Taking Professional Advice Before Major Financial Decisions Can Save Money
Decisions made immediately after redundancy can affect your finances for decades. Taking independent financial advice before accessing pensions, investing redundancy payments or retiring early can help you avoid costly mistakes and identify opportunities that may otherwise be overlooked.
Redundancy does not necessarily mean your retirement plans have been derailed. Reviewing your pensions, investments, redundancy package and retirement income strategy together can often reveal opportunities that would otherwise be missed and help you move forward with greater confidence.
Common Financial Mistakes People Make After Redundancy
Redundancy often forces people to make important financial decisions during a period of uncertainty. While it is natural to focus on replacing lost income or reducing immediate financial pressure, decisions made in the weeks following redundancy can have a lasting impact on your retirement security. Avoiding the following common mistakes can help protect your long-term financial future.
Taking Pension Benefits Too Quickly
Many people view redundancy as the trigger to access their pension immediately. However, taking pension benefits earlier than planned can reduce the income available throughout retirement and may also have tax implications. Before accessing your pension, it is important to understand how doing so could affect your long-term financial security.
Spending Your Redundancy Payment Without a Plan
A redundancy payment can provide valuable financial flexibility, but without a clear strategy it can disappear surprisingly quickly. Taking time to decide whether to repay debt, strengthen emergency savings, increase pension contributions or support future retirement plans can help you make the most of this opportunity.
Making Emotional Investment Decisions
Periods of financial uncertainty often tempt people to sell investments or move into lower-risk assets without considering the long-term consequences. Reacting emotionally to short-term market movements can damage long-term investment performance. Maintaining a disciplined investment strategy usually leads to better outcomes.
Underestimating the Tax Implications
Redundancy payments, pension withdrawals and investment decisions can all affect your tax position. Understanding how these interact may help reduce unnecessary tax and preserve more of your wealth for retirement.
Claiming Benefits Before Understanding the Consequences
If you are eligible for state benefits following redundancy, it is important to understand how they interact with redundancy payments, pension withdrawals and other income. Making decisions without considering the wider financial picture could reduce your future options or create unexpected financial consequences.
Ignoring Long-Term Retirement Income Needs
Many people focus solely on replacing lost income in the short term and overlook the effect redundancy may have on their retirement plans. Reviewing your expected retirement income, expenditure and future pension provision helps ensure your long-term financial objectives remain achievable.
Failing to Review Estate Planning and Financial Protection
Redundancy often changes your financial circumstances, making it an ideal time to review your Will, beneficiary nominations, life insurance and wider estate planning arrangements. Ensuring these remain appropriate helps protect your family should your circumstances change unexpectedly.
Delaying Professional Financial Advice
Many of the decisions made after redundancy cannot easily be reversed. Seeking independent financial advice before accessing pensions, investing redundancy payments or changing your retirement plans can help you avoid costly mistakes and identify opportunities that support your long-term financial goals.
Redundancy often creates difficult financial decisions at exactly the wrong time. Taking a structured approach to your pensions, investments, tax planning and retirement strategy can help protect your long-term financial security while giving you greater confidence about the future.
Conclusion
While losing your job later in life is difficult, it can also serve as a wakeup call to get your finances in order before entering your official retirement.
Getting a handle on your budget, organising your finances, and evaluating your insurance coverages are all excellent ways to prepare for life after work.
Furthermore, adjustments to your lifestyle by working as a consultant or in a different career can be great for your mental health.
Although many people look forward to leaving the workforce, choosing to continue working, while gradually transitioning out of corporate life to a less stressful job has benefits too.
It helps retirees keep active, have daily structure and stay mentally sharp, while also providing some additional income in order to delay living strictly off their savings.
As people continue to live longer, there is no doubt that the trend of leaving the workforce prematurely will continue.
Having a strategy in place for that possibility is the best way to preserve your finances as well as the retirement you envisioned.
Talk to an Expert
Redundancy close to retirement can be unsettling, but it doesn't have to derail your long-term financial plans. With the right advice, redundancy can become an opportunity to review your pensions, retirement income, investments and tax position, helping you build a stronger financial future rather than making rushed decisions under pressure.
I'm Ross Naylor, a UK-qualified Chartered Financial Planner and Pension Transfer Specialist with nearly 30 years' experience helping individuals and British expats navigate redundancy, restructure their retirement plans and make informed decisions about pensions, investments and retirement income.
I firmly believe your location in the world should never be a barrier to expert, impartial and transparent financial advice you can trust.
Whether you're deciding what to do with a redundancy payment, considering early retirement, reviewing your pension options or simply wondering whether you can still afford the retirement you've planned for, I'll help you understand your choices and develop a financial strategy that supports your long-term goals with confidence.
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