Redundancy pay

[Autumndayz77]

Morning everyone,

I am shortly going to be taking voluntary redundancy. I am very fortunate to be getting a decent package that should give me 10 months of frugal living, whilst I look for something new.

One of the things I am unsure of is what to do with the lump sum? (where to put it in terms of saving account, isa etc.) I want to essentially pay myself a salary for the next 10 months on what would have been my usual pay day. Looking at low risk ideas as got kids to support and bills to pay!

You don't want more than £85k in any one financial institution due to FSCS compensation (if banks fail).
Except NS&I who are government backed and guarantee everything with them.

I'd put £20k in an easy access ISA and then depending on how much you will get the rest in savings or premium bonds.

You have to pay tax on savings over a certain threshold (likely to be £500 as I'm assuming you will be a 40% tax payer? But if you go into the 45% bracket you get no allowance). No tax on premium bond prizes although you have a £50k limit there.

If you will spend it over 10 months I’m not sure what the benefits of an ISA would be.

Have a look on MSE: there was a good 6 months fixed rate that was good last time I looked, so anything you don’t need for 6 months you could put in there, and keep the rest in an easy access - but check their rules on withdrawals. Some limit the number you can make, but Shawbrook (for example) don’t limit the number but each withdrawal has to be £500 or more.

Would you have an accessible emergency fund? Boiler, roof or car emergency ?

I was only thinking about avoiding tax on an ISA, it entirely depends how much OP is getting as to whether that's a consideration

Thank you for responding. I did consider putting it in my isa but wasn't sure of the impact on monthly w

I should have said I will be getting 18k. I will check out the links thx.

£18k in a 5% savings account will be £900 interest over a year. You have a £500 limit on interest before you pay tax, however if you will be taking money out over next 9 months paying tax doesn't sound like it will be a consideration anyway.

It's £1k interest tax free if you are a basic rate tax payer.

OP -you might get a new job very well paid after a couple of months to draw breath - at that point if you intend to start building long term savings you could put any money remaining (less an emergency fund) into an ISA.

I would take stock just before the deadline for this financial year's ISA is due!

And as pp have said, a lot depends on your tax status this financial year.

A redundancy payment is tax-free. (up to £30k)