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Financial advisor: Your job just gone? Here's what you should do right now to mind your money

There are financial steps you can take to alleviate the stress of losing a job, according to Mark O’Sullivan of Provest.

Mark O’Sullivan

YOU HAVE BEEN advised that your job is going, it has come out of the blue, you’re shocked, angry, and emotionally you feel very let down. Firstly, don’t panic, this time will pass.

We’ve seen much turmoil in the tech sector recently in particular and while news like this is never easy to hear, it’s tougher still in the midst of a cost of living crisis. The good news is that the Irish jobs market is still fairly buoyant so one would hope you won’t be out of work for very long.

In the short term, you will need to be able to weather the storm financially as you turn to the possibility of a replacement role in another firm. This process can sometimes drag on for a while, so what financial safety nets have you considered?

Despite the bad news, you may be fortunate enough to be paid a lump sum on leaving your role, part of which will be tax-free (statutory redundancy). A fair bit of the remainder such as holiday pay and pay in lieu of notice will be subject to tax, but this will all help with the credit side of your balance sheet and help you keep your standard of living.

Early engagement with Social Welfare is key to ensuring that any benefits you are entitled to are received (this will assist you with your cash flow) and also allows for you to maintain unbroken social welfare credits towards your state pension.

Get control of spending

You then need to carry out a detailed review of your outgoings (expenditure), this would include all standing orders/direct debits, credit or debit cards, probably the most important one being your rent or mortgage payments, along with any personal life assurance and private health insurance.

On the mortgage side, it’s important to check if you have payment protection insurance as this should cover your payments for the period that you are unemployed.

Because you will have less money, this detailed review of your expenditure, including minor savings, will help with your outgoings and eradicate unnecessary/discretionary spending. Putting away and just not using your credit and debit cards during this period will create a discipline to reduce spending and increase your savings during this challenging period.

This review alone will allow you to evaluate what can and cannot be paid for over the coming months. It’s important to note that by talking early to your landlord or mortgage lender and explaining your situation, the opportunity to work out a revised payment schedule is greater. It also, most importantly, maintains your credit rating with the financial institutions during this period.

What about your pension?

Your employer may have had a pension and health insurance plan, to which both they and you contributed. You need to engage with your employer’s HR or the consultancy firm/insurer they used to find out what is happening to your benefits and what your options are.

Included in these options will be details of where your pension assets are invested if young and dependent on the risk you have adopted. This may not require any change, however, if you are in the 50+ category, it may require a closer review.

It’s very important to consider that within the pension plan there may have been death benefits provided, which will cease once you leave. These may be extended for a period, but you need to know what is happening, what your options are and if these options allow you to maintain the cover yourself (independently), without a break in cover.

If you do find yourself out of a job you may be wondering if it would be possible to freeze your pension until you have secured a new job. Well, the answer is yes, you can freeze your pension for an indefinite period of time but I would strongly advise that you keep a regular eye on it to see where it is invested. It is also important to share your contact details with either the insurance company or the consultancy firm who are dealing with your pension to ensure that any relevant developments or actions can be sent to you.

If you do get another job and the company doesn’t provide pensions and insurance then don’t panic as it doesn’t mean the end of your pension plan. You should seek impartial advice on setting up a PRSA to enable you to contribute to a pension arrangement and at the same time benefit from the tax reliefs available.

Under the law, the company is obliged to provide you with access to a pension arrangement (it does not have to contribute) so you can talk to your new employer about facilitating this option.

Separately, you could establish a personal retirement savings account (PRSA) having sought impartial advice on the most suitable and cost-effective arrangement for you.

This can be an extremely difficult and stressful time for anyone who has lost their job but I would advise you not to panic about your future finances. Reputable financial advisors will have experts who are available to answer any questions or queries.

Mark O’Sullivan is Managing Director at Provest – a private client and pension consultancy based in Cork. For more information see Provest.ie.

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