Voluntary redundancy scheme

[murasaki]

Hi All , any advice welcome.

So we have for the thrid time, a VSER scheme open. it's less generous than thel ast two (no difference to me, as I have been there for more than the 13 years required to get a month per year, lower grades get two weeks, which seems unfair, but that is how it is, and I have expressed that on the part of my team as the restructuring that has precipitated this only emerged to us recently, and they would have taken the last scheme in many cases). Anyway...

I am really thinking that I should take it. I have been there 18 years, love my job, but the new jobs available don't suit me (specialist not generalist. and so far the jobs that I really enjoy aren't even delinieated - I know this as I am on the senior group mapping things over where tasks are done).

So, I am inclined to take it. I haven't seen any costing yet, and know that the first 30k is tax free, but am confused re the tax on the rest (currently £55k) and also where pension costs ,we put in 9.8% of salary, they put in 21.6%, which is very generous, I know. USS university pension wscheme if that helps.

Given the speed with which these things move, I was wondering if anyone had any advice on where the rest would be taxed (20%/40%?) and how the pension fits in? I'd like to feel comfortable pre getting the documents, if you know what I mean.

At 45 I'd be looking for a new job, obviously, but can't have an offer in hand when signing (don't know how they'd know bar references) and fancy the summer off while I look.

Any ideas on what the payout/pension implications would look like?

thanks!

Sorry, to clarify it's a years salary if over 13 years service rather than a month per year

I'm no public sector pension expert but I've dealt with a lot of redundancy pay outs. You can normally pay up to £40k per year into a pension (and allowances from previous years can carry over so it's often possible to pay in more that that). So hopefully you could put some of the money directly into your pension which would be tax efficient.

As you say up to £30k will be tax free. Then the tax rate on any remainder that isn't put into the pension would depend on your earnings in the current tax year, and if you plan to work for the remainder of it. If notice is paid in lieu then that is taxable. If you have a helpful payroll department perhaps someone could do an estimate for you. Hope that helps a little.

Thanks - the end date can be anywhere pre July 31st, so if I went, say May, my earnings would be low for that tax year starting 2023. They will pay up to £400 for a lawyer to look over it but I'd rather an accountant! Good point re paying into pension, I will contact them post application and see what they say.

Payroll, to be fair, are a bunch of clowns that I have to deal with on a daily basis, so I would trust them as far as I would trust my cat.

I'm keen to knack off before the big jobs re exam boards and end of year financial returns as I am running out of fucks to give right now. So either end of May or June would work. Realistically given the pyramid of jobs and notice period, I would't get anything pre January at the earliest anyway.

Re: putting some into your pension be aware that yes you have an annual allowance of £40k, plus cfwd of any unused allowance from previous 3 years but you are also limited to your annual income which might be low if you do it early in the tax year and don't work again so you need to do the calcs.
You'll pay your marginal rate on the severance above £30k that doesn't go into your pension.

Being that early in the tax year hopefully a lot of the taxable amount would be at 20% tax. If some is taken at 40% but at the end of the tax year you realise this was too much, you can contact HMRC to claim it back.

It sounds like a good package, you just need to feel confident about getting another job. If £30k is enough cash to bridge any gap, and you intend to work again in the tax year then it would be most tax efficient to have the balance going into the pension.

30k should be fine for getting a new job, and one at the lower level (say from grade 8 to 7) would mean less tax anyway if it cut under the 40% margin so the take home wouldn't be so bad if I went in at the top, I could live with that. Although the pension is on final salary up to 2011 and average career earning after that. I may well end up putting some into the pension scheme, I think we can talk to a pension person about that rather than payroll who are gibbering idiots. Useful to know, thank you all for your help. It's feeling like I ma having to make a major decision without all the facts that is un nerving - I can't see all the new internal jobs that might be relevant re reapplying, as they aren't plotted out yet, just the teaching side, and I am financially in the dark too. You are stars, thank you. Lots to think about.

Oh one more point, I assume I couldn't just put the pay off into my savings account as I'd have to do a tax return on any interest, I wouldn't be happy leaving it in my current account re potential bank card fraud , but would need to use it to pay my monthly expenses for a bit - would an instant access ISA or something along those lines be best? As you can see, I am a novice at potentially having a wodge of cash. I have an instant savings account with my bank, but it is under 8k at present.

Yes a cash ISA could be a good option while you need to live off the savings, bearing in mind the £20k pa limit.

Is your HEI in London by any chance.....?

@murasaki you have to have a solicitor look over the paperwork (assuming settlement agreement). It's a legal requirement and won't be binding if there isn't a signed adviser's cert. You can always try to find a solicitor that will do it for £250 + VAT and ask if you can use the extra towards an accountant, but it's rare to find one that cheap these days. That wouldn't even cover an hour of my time and a basic SA takes at least that. Or you could try and negotiate a separate sum towards financial advice? However any decent employment lawyer should be able to answer most, if not all, of your financial questions.

@titchy yes.....

Don't blame you at all, it's not going to get better imo. I'm a lot older and just marking time.

Thanks all, lots to think about. I suspect Titchy may have figured out where I am, but hey ho...