Being made redundant can be unsettling at any stage of your career. In your 50s or 60s, however, it can feel particularly difficult.

According to data tracking long-term workforce trends published by the Centre for Ageing Better, older workers face a structural disadvantage, with those over 50 consistently suffering higher selection rates for job cuts and significantly worse re-employment bottlenecks than younger peers.

You may have been with your employer for many years, you may have been expecting to continue working for several more years, and retirement may have suddenly become a much more immediate financial consideration. But redundancy does not necessarily mean that your retirement plans have to be put on hold. Depending on your circumstances, it may provide the opportunity to reassess what you want from the next stage of your life and whether your existing financial plans still reflect those ambitions.

The key is avoid making significant financial decisions without first considering your wider financial circumstances and longer-term needs.

Start with the bigger picture

The first question is likely to be how long you actually need to work.

If you are in your 50s, redundancy could mean finding another role and continuing to build your pension for several more years. If you are closer to retirement, you may instead start wondering whether this is an opportunity to bring forward your retirement.

Neither option is automatically right. The answer depends on your income needs, savings, pensions, mortgage and other debts, expected retirement income and the lifestyle you want to maintain. It can also depend on how long you expect your assets to last.

This is why redundancy can be a useful point at which to step back and review your overall financial position rather than immediately deciding what to do with the money you receive.

What should you do with your redundancy payment?

For eligible employees, statutory redundancy pay is calculated using age, weekly pay and length of service.

For redundancies taking effect from 6 April 2026, the statutory weekly pay cap is £751, with a maximum statutory redundancy payment of £22,530. Your employer may, of course, offer a more generous package.

If you receive a significant lump sum, it can be tempting to immediately pay down debts, put the money into your pension or use it to fund an earlier retirement. There may be good reasons for doing any of these things, but the right answer depends on your circumstances.

The first £30,000 of a qualifying redundancy and termination payment is  generally exemptfrom Income Tax, although other parts of a termination package can be taxable.

There may also be circumstances where paying some redundancy money into a pension could be tax efficient. MoneyHelper notes that pension contributions may be possible using redundancy payments, subject to the specific pension rules, including relevant earnings and annual allowance limits.

The important point is that tax efficiency should not come at the expense of financial security. If you need the redundancy payment to support your household while you look for another job, locking the money away in a pension or paying down larger lumps sums to reduce debts may not be appropriate.

Don’t forget the pension you already have

Redundancy does not mean that the pension savings you have already built up disappear.

Your existing workplace pension remains yours, although your employer’s contributions will normally stop when your employment ends. You may be able to leave the pension where it is, continue contributing in some circumstances or consider transferring it to another pension arrangement. This is an area where taking your time can be particularly important.

If you have an older pension, you may have valuable benefits or guarantees that could be lost if you access benefits early or indeed transfer it.

This can be especially relevant if you have defined benefit (sometimes known as final salary) pensions, where giving up the existing benefits can be a significant decision.

The Financial Conduct Authority (FCA) describes giving up a defined benefit pension as one of the biggest financial decisions you can make The FCA expects that for most people, they should not transfer their defined benefit pension scheme

Equally, if redundancy has brought retirement forward unexpectedly, you may need to consider when and how to access your pension savings and whether your available resources could support your financial needs over potentially many decades.

A chance to rethink what comes next

It is entirely natural to view redundancy as an unwelcome disruption, however this forced pause also brings a unique chance to evaluate your next steps. It creates a moment to address critical lifestyle and financial questions that routine busyness may have caused you to delay.

Do you want to work full time again? Would part time work give you a better balance? Could you retire earlier than expected? Would a career change make sense? And, perhaps most importantly, can your finances support the choices you would like to make? There is no universal answer. For some people, the best outcome will be finding another role and continuing to build their financial security. For others, redundancy may be the catalyst for a gradual transition into retirement or a completely different way of working.

Before making a decision, it can help to understand what your current finances can realistically support. Looking at your redundancy package, pensions, savings, investments, debts and future income together can give you a clearer picture of the choices available to you.

A redundancy may not have been part of your original plan. But with the right financial planning, it does not necessarily have to derail the plan you had for the future. It could be the point at which you stop, reassess and decide what you want the next chapter to look like.

At iPensions Wealth, our financial advisers can help you review your financial circumstances, explore your retirement options and make informed decisions about your future. Contact us to discuss how we can support your financial planning needs.

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