To think it's completely wrong to select someone for redundancy with less than 3 years to go til full Pension

[LaurieFairyCake]

As you just know they're doing it (no matter what bullshit reason they give) to save hundreds of thousands of pounds.

I can't believe someone can give 35 years of their life to one company and be made redundant the year before so they lose full pension

It is shit, and not uncommon. Are they in a union?

But surely if the person has worked for the same company and paid into the pension, they will get a full pension, minus a tiny bit for the contributions not made and they will get a relatively large redundancy pay off? Where I work, we get up to 2 years annual salary as a redundancy payment.

This is happening in my organisation and people in the situation you describe are fighting to be made redundant because it effectively means they will receive most of the money they would by continuing to work without having to actually go to work.

Some will retire early and live off their redundancy until the pension kicks in including some that will be able to live very comfortably abroad, others will get casual work as and when and others will be able to do very lucrative consultancy work.

My mother was praying for redundancy during the years leading up to her retirement. She would have been much better off.

Presumably there is no redundancy pay in this situation though? How does the company save hundreds of thousands of pounds?

If they've worked there 35 years and were planning to work another 3, doesn't "losing their full pension" mean they are being left with 35/38ths = 92% of a full pension, or something like that?

I dunno. Maybe the company are being arseholes; maybe it was the kindest decision all round to chop the person who's going to be leaving soon anyway.

Would you rather they'd done it to someone with a mortgage to pay, and a spouse and two kids to support?

Yes, I agree with the others - the person being made redundant will still get almost all of their pension, it's not all or nothing.

As far as I understand this case in particular if you do the full 35 years then the full pension is £1000 a month.

If he's made redundant at 34 years then it's only £600 a month - which of course is a massive difference and designed to save the company a fortune.

A bit like compound interest where it's a sudden jump at 35 years. It's not equal, the last year is worth 8 times more than the previous year iyswim

Redunancy is never nice and there are clear rules for deciding who gets the chop. The criteria cannot be ageist or sexist. A role is made redundant rather than sacking an individual.

The person in question will get 92% of their pension and 18 weeks of pay as an absolute minimum. I am not sure, but I believe that the legal minimum lump sum for redunancy is tax free as well. Many companies offer a more generous reducancy package than they legally have to in return for the employee agreeing not to take them to tribunal.

It's hard to say given the details you've given here. It might be that redundancy is completely justified on the basis of performance and/or business necessity. In which case, regardless of the pension situation, the person concerned should be made redundant - not taking a job that a more competent person could be doing or costing the business money that they can't afford.

It sounds as though you're talking about a large employer here with an employer's scheme that appears as a liability on their balance sheet. in which case, either they've already made provision for the extra money that longtimers will cost or they haven't. If they haven't, then the cost will be on the pension fund and not on the cost centre of the people making hiring and firing decisions. So I disagree with you that it's likely to have been done to save money.

But it's hard to say without full details.

And I agree with SaucyJack

Yes, Really Tired, the first £30k of any redundancy payment is tax free.

Laurie, is this a final salary scheme? of so, I can't see how 1 more year would make such a vast difference? I guess it must be, or they wouldn't know what they'll be getting.

TBH, I have little sympathy for anyone nearing retirement with 34 years in a final salary scheme. Whilst it's a shame for the individual, no future generation is going to get employee benefits anywhere near as good.

It does seem rather insensitive to make someone redundant when so close to retiring. How devastated and hurt the person losing his/her job must be.

It's not the same but I was made redundant 3 weeks before I would have qualified for a redundancy payout. A co-director told me that 'today' - a Friday -was my last day (just like that).

I had been PA to the other co-director and I didn't see him at all that day although he was in the office so I'm sure he knew that it was coming to me. After work, while I was waiting for my car being serviced next door, the second co-director stopped his car and said, "Sorry, I didn't see you to say Goodbye." I managed to grate out that I'd been there all day and, if he'd wanted to say Goodbye, it wouldn't have taken much effort on his part.

My stepdad is four years to retirement and has just been made redundant but will is on full pay at the moment until his settlement is sorted then gets six months gardening leave then his full pension plus a six figure redundancy so he's actually thrilled. He's getting almost as much without actually having to go to work. It depends on the company.

I don't think there is anythng wrong with it.

Where would you make the cut off? One year, 2 years, 7 years? People will always be made redundant that feel they are getting a raw deal.

3 years off is a long time. The week before, I'd have a problem with. Not 3 years!

Is the person in a union? If so, they need to seek advice ASAP.

If not, you can join most unions "late" and backdate a few months membership fees in order to be entitled to their help / protection.

What field does the person work in?

Yes but with the redundancy etc won't he be better off overall? Certainly in my last job the people with 2 or 3 years to go were clambering over each other to get out of the door. He needs to check all the facts.

I agree also with Treats, "The company" don't save any money, the pension fund does, so if anyone benefits (and the difference is as big as you say, which I'm struggling to understand) it's his remaining colleagues whose pensions will be more secure.

As an employer my dad always tries to avoid making anyone redundant who is either over a certain age or has been with the company for more than so many years as its so expensive (your statutory entitlement increases if you are above a certain age. )

Hmm, I'd keep that quiet Pictures, I think what you've described there is illegal!

Obviously we don't know the full details but it sounds very odd. There are "preservation rules" governing pensions that protect people who leave before normal retirement date for whatever reason. Essentially, in a defined benefit scheme, there shouldn't be a big difference between the pension of someone who leaves close to retirement and someone who stays till retirement. (Unless a big payrise is granted just before retirement, but that's a different matter.) The individual concerned should definitely speak to HR or a union rep to understand what's going on.

I know someone who was made redundant 6 months before retirement and she was thrilled. Large redundancy payment, minimal impact on her pension and 6 months less work.

Assuming you're correct about that pension then it's pretty much a unique scheme. I don't know of any other in the UK that works as you describe (I used to work in pensions).

Can't see how it's illegal as it means that those with long service/more experience are the ones kept on & you can select according to experience & qualifications/length of service.

"Hmm, I'd keep that quiet Pictures, I think what you've described there is illegal!"

There is nothing illegal about reduancy policies that favour longivity in the company. A lot of companies use a points system when selecting people for redunancy and its OK to give points for "experience". You cannot use age as a reduanancy criteria, but its allowable to keep on the more experienced individual. Performance managment is completely different.

It was the age thing that made me Tired.

"As an employer my dad always tries to avoid making anyone redundant who is either over a certain age ....."

You can't chose candidates for redundancy based on their age, as you say.