Redundancy, savings and security

[MoneyIsntFunny]

Name changed for this.

Basically DH46 has been made redundant. He has received an enhanced package which meant after tax, we would be able to survive for about 18 months on this alone without accessing other savings. This has obviously been a big comfort, and he's already interviewing for other jobs. However the market in his industry is TOUGH and even if he gets another job soon, there's nothing to say he wouldnt face redundancy again in the near future.

I am working FT but not enough to support us.

DH has been taken financial advice, and has been told to put a substantial chunk into pension to avoid paying any tax. Whilst I can see this is sensible in the long term, it reduces our runway to 6 months and makes me feel very nervous.

On top of this, I don't have access to our savings pot (it's gone up and down over the years with building work, paying down mortgage etc but we've both contributed substantial sums, although DH more than me). We did have a joint offset account but since changing mortgage this has gone into DHs savings.

I hadn't really had an issue with this, but now we are in this situation I'm feeling quite nervous about not having access, and also that it doesn't feel like the decision about the redundancy pay is being made jointly.

I've tried to raise this with DH and he seems suspicious of why I want access. For full disclosure we were in a bad place last year and were in counselling, very neatly broke up. However we've worked on our relationship and are now in a better place.

A lot to unpick, but before I try to speak to DH again I'd like to know what others think is fair in this situation and how much sway I should have on the redundancy decision

You need access to anything that is yours and a full understanding of all finances. It's not good that he seems suspicious of your need for this.

You're married. All financial decisions should be made jointly.
Him hiding things doesn't bode well. What is he afraid of?

I’m a very financially savvy person I believe and that money is not money to be put into a pension under the current circumstances. I agree with you. I’m surprised he’s been advised this. I think he needs this to cover living expenses for the foreseeable.

He needs to give you full transparency and openness. And the decision about the redundancy payment should be made jointly.

I would be nervous about it going into a pension if the jobs market is tricky

Also- you need access to and visibility of those savings. I think you have been a bit naive, particularly if you nearly split up

If he hasn't used the allowance on his pension ask the financial adviser if he can pay it into the pension later if you don't need it and backdate the tax relief. I have certainly done that before. I think this is on part a cash flow question but I am not a financial adviser!

Unless it is a company enhanced scheme or allows him to buy years in a defined benefit scheme in which case that might be different

Don’t put it into pension.
also you could say that this financial situation has brought to light that you have access to savings but that as they are joint savings you should. You could also make sure that your money is working well for you with current interest rates. If he won’t give you access get your own savings and stop putting into joint!

In a similar situation, dh did put some into his pension. I think it all depends on the numbers elsewhere, how good his pension already is, the likelihood of getting another job, the amount of savings. I must say I wasn’t sure it was a great idea and it did cause some friction. The whole thing has been very stressful. You need all the information to make an informed decision, he shouldn’t be suspicious of you for wanting full disclosure on your own finances.

I think a frank conversation needs to be had. Just tell him straight you need access to the savings and they should be in a joint account. To be honest you're the one who should be suspicious of him because why wouldn't he want you to have access to your own money.

Personally I think all couples should have their own savings in their own accounts and split bills/expenses as and when. I would hate the thought that someone could take all my savings in the event of a relationship breaking down. But that's just me.

It’s probably a good idea for it to go into his pension. My DP did similar. If he’s confident he’ll get enough job within 6 months, I don’t really see the issue.

@LegendsBeyond I think the issues is we just don't know about the job. It's not a shoo in, across the industry hes in there have been a huge amount of redundancies from big companies (google etc) so there are a lot of job hunters.

Add in his age and the fact we need to remortgage next year I would feel so much better having the cash in the bank (even if it's half the amount because of tax).

He just says 'do you want me to lose half of it in tax?' But I think that's quite a blinkered view of the reality

So worst case scenario - he doesn't get a job within 6 months and you have to start dipping into the savings account. Is the amount of interest you would lose on savings greater than the tax you'd pay on taking the lump sum?

I doubt it - but add in possible having to pay down the mortgage to make it feasible just on my salary (which I assume we'd have to do if he wasn't working) then we'd quickly be out of savings completely.

Yes that's worst case scenario, but not beyond the realms of possibility in the current climate.

To me, holding onto the extra money (despite it being half the amount than if it was in the pension) then using it to pay the mortgage down next year to protect our savings, makes more sense. I also did a mortgage lump sum calculator and we'd save just over the tax amount in interest and reduce our term by 5 years so seems like a no brained to me? I'm going to ask to be on the next call with the IFA so I can ask these questions

I would not be paying the redundancy into the pension until he has another job confirmed and has passed any potential probation period etc as whilst it is definitely the most tax efficient thing to do in your circumstances you need to higher level of liquid cash than usual.

Also this isn't a one time window to pay those funds into the pension. If / when he gets another role he can pay into his pension- annual allowance is £60k from this year and if that's in the next tax year he can use a carry forward for any unused allowance from the previous three years. Basic tax relief will be applied at source by most pension providers and then he will have to do self assessment if he is a higher rate tax payer to reclaim the addition tax credit. Definitely get on the call with the IFA.