How can I make the most of my redundancy money?
For MAVENS and MOGULS by The Accumulator
on January 20, 2026
While death and taxes may be the only certainties in life, redundancy runs them a close third. Which helps explain why we’re regularly asked about how to make the most of a redundancy payout. (Investing wise, not George Best style!)
Where should you save or invest your precious redundancy cash to make it work for you, at a potentially precarious time in your life?
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Brilliant though possibly a week late!
I received my redundancy money last week. Premium bonds and this year’s ISA are already nearly maxed out so I paid off the remainder of my mortgage at the weekend. Everything above the 30K went straight into my pension. This should take me well over the 50% FI mark I seem to have been hanging around at since late 2021v
In my case, I had another job lined up to start the very next day. Many folk were commiserating me when they found I was being made redundant, but it has honestly felt like winning a lottery.
Great article, thanks @TA.
“While death and taxes may be the only certainties in life, redundancy runs them a close third.” Never a truer word spoken. Happened to me a couple of times and know of few who have escaped entirely. Very much a thing at the moment in my industry, although now immune, working my notice to retirement :0) Retains relevance however with a comparable end of year bonus before the final so long and thanks for all the fish.
I would only add the most obvious and best value of all investments – make sure to renew your MV subs!
Well I am beyond the reach of this now but my thoughts were that redundancy throws up a lot of uncertainty about the future ( assuming you need to work), so things like relocation may be an issue, in which case make cash for that risk a budgetary priority.
Some employers let you stage out the redundancy pay over two years. If you’re actually retiring early then that can help you – take the first 30k plus any strategic pension contribution, if there is money left over take it next year, when you will have an otherwise unused personal allowance.
This does depend on the employer offering deferral and the usefulness varies with when in the tax year you retire as well as how close you are ot the next level tax thresholds
Redundancy is very common in construction. I had only one experience in 2013, for 10 years service I received about £8k. I put it into my SIPP, as I had already been overpaying the mortgage, seeing the writing had been on the wall for a few years post 2008/9.
Premium Bonds:
There’s another nice calculator at https://premiumbondsprizes.com that, IMV, still presents the statistical outcomes much better than the MSE one does (i.e, the winnings are given by percentile rather than the percentage by winning amount).
It is then easy enough to roughly compare the median winnings rate (currently 3.1% or 3.18% for a couple) with taxable accounts, i.e., 3.1*1.2~3.7% for a basic rate tax payer, and 4.3% for a high rate taxpayer. It is also useful to note that the random variation in winnings (over a year with £50k, there’s an 80% chance of winning between 2.2% and 4.6%) dwarfs the effect of tax.
The top rate at MSE of 4.5% is currently available to new Chase customers only – the next best rate is around 4.1%, so, for existing customers, the comparison will not apply.
I think it is over the last year that I finally got fed up of chasing rates by constantly opening new accounts and moving money around. Yes, I am potentially losing a bit in interest, but having cash in fewer places is useful.
Have long kept a reasonable amount of of cash on hand-2+ years living expenses
So interested in a good rate
Use one high interest bank account with enough in it not to breach the £1000 free interest for 20% tax payers
Rest in Instant Access Cash ISAs which like Alans S I no longer chase rates all over the shop-too much hassle.Choose a mainstream provider and stay the course -it’s a competitive market -you may have to move monies within the provider’s products range occasionally but that’s a very much simpler procedure than having constantly to sett up new ISAs with different providers
xxd09
@A14M – that is the dream! Well, done.
@Paul a38, Ermine and Alan S – nice insights, thank you!
More generally, the best financial step I ever took was establishing an emergency fund. Takes so much pressure off.
Beyond that, it’s hard to go wrong with chipping away at the big long-term goals of paying down the mortgage and plumping up the pension.
I’m tired of rate-tarting too and a money market fund seems like the simplest way of solving that one.
In my time, I’ve witnessed many good people go through the stress and worry of redundancy. In virtually every case, they landed on their feet in the aftermath. It happened time and time again, so I take heart from that.
Great article, thanks. Little correction in that there is a 2030 maturing linker, it’s just that it is an 8month jobbie and of such high coupon that it’s only worth bothering with inside a tax wrapper for most. ISIN GB0008932666.
@TA Rate tarting is a pain in the backside, but I’d put in a word for HL Active Savings here. It’s literally a few mouse clicks to move from one bank to another. HL send a warning email if the bank you are with are planning to lower the rate. I currently get 3.97% AER on savings there (currently with Atom Bank) and from what I can see the SONIA rate is currently 3.72% on the BOE’s website.
HL don’t seem to inform when a better rate is available, but a monthly check doesn’t take more than 5 minutes.
You don’t get offered the absolute best rates (as per MSE) but it’s pretty close and much much less work,
Windy
@Windinthefens (#10)
Second your comment – we’ve also started using HL active savings. The ‘cost’ can be 10-20bp compared to opening the equivalent account directly with the relevant bank. Although, HL now rarely has the ‘best’ rate, the top few available at HL are usually competitive with the ‘best of the rest’ at MSE (e.g., current best easy access is 4.05% compared to, ignoring the 4.5% for chase, 4.13%).
The only annoying thing is that ‘dead’ accounts (i.e., with zero) hang around and I haven’t found a way to close them (although you can hide them).
@Always Late – great correction, thank you! That fills in all the gaps to 2043 🙂
@Windinthefens – that’s good to know. Cheers!
Another great and timely article as redundancy hits me for the first time in nearly 40 years at the end of January!
One suggestion for this article is to briefly discuss ‘Payment in Lieu of Notice (PILON) vs Garden Leave’ where this is offered by the employer.
At this time of year, this decision can have a major impact on how easy it is to shelter redundancy payments from tax. In my case I have a 12 week notice period starting Feb 1st and decided to take it as ‘Garden Leave’. This means I get normal monthly pay (and employer pension contributions) through the end of the current tax year with my last pay packet and redundancy payout occurring in the new tax year. Makes it easier to take advantage of the £60K contribution limits and in my case most of the redundancy payment will be subject to 20% income tax rather than the higher rate. This works for me as I plan on taking the opportunity to take some time out to contemplate what life as an early retiree might look like!
Great, targeted article.
“The annual amount you can put into a cash ISA will go down to £12,000 from April 6 2027. ”
Actually, the £12k limit isn’t the big problem.
The big problem is that, in order to make the £12k annual limit work, there is likely to be a complete ban on transferring funds from S&S ISAs to cash ISAs.
This takes us back to the pre-2008 situation, before Alistair Darling’s liberalisation of the ISA regime.
It’s rather like destroying the town in order to save it (“It became necessary to destroy the town to save it.” – This Day in Quotes https://share.google/1PH40ib3uolUEp27j)
I have noticed that I am already increasing my contributions to cash ISAs, even though I should be putting that capital into my S&S ISA, because of future contributions limited: the opposite of the state’s intentions.
“Premium Bonds
…
The odds worsen when you hold fewer bonds.”
Eh? Surely the odds are the same, but the volatility increases!
The fewer premium bonds you own, the lower your odds of winning a prize, the worse your outcome when comparing your ‘average premium bond rate’ versus competitor bank accounts. Check out the links.
I share your doubts that messing with ISAs is a good way to encourage more people to invest. By the looks of things they’re just going to make it more painful for those of us who already do. It’ll be ridiculous if you can’t choose to reduce your risk in a stocks and shares ISA by reallocating to a money market fund.
@fiby55 – congrats on engineering your FI pilot scheme. I hope it all works out for you!
@The Accumulator #16
“The fewer premium bonds you own, the lower your odds of winning a prize, the worse your outcome when comparing your ‘average premium bond rate’ versus competitor bank accounts. Check out the links.”
I have done as you requested and looked at the MSE tool.
What it’s showing is that the more Premium Bonds one holds, the closer one’s outcome approaches that of a savings account. It does show that the odds of not having done worse than with a predictable deposit account reduce as one increases the number of bets placed.
It’s certainly true that the odds of winning a prize increase, the more bets one places. However, that’s not the yardstick that a investor should be using: One must look sat the overall return and volatility.
It’s certainly true that the volatility of one’s portfolio decreases, the more independent bets one places.
However, we must be careful not to give the opportunity for the casual reader to mistakenly form the impression that one’s expected relative return changes with the size of one’s holding. There’s already plenty of superstition around gambling.
It’s a less risky investment to hold more premium bonds, but let’s remember that the extreme case outcomes are far more extreme than holding a small number of bets with the remaining capital on deposit.
(A purist would now that one’s expected return actually decreases the more bets one holds, because they are not really independent: One is competing with one’s self to win each prize. In this sense, the odds are better if one holds single premium bond for a hundred weeks than if one holds a hundred such bonds for one week. Of course the prize fund increases a little, when one buys one hundred bets, but it doesn’t increase one hundred times).
JtE (#17)
It is, at least partially, the quantum nature of the prizes that causes the oddities in the median.
Imagine a case where the median win is exactly 1x£25 prize per month – holding a few pounds less would mean that the median would drop to £0 per month.
The odds of a prize remain fixed regardless of the size of the overall pot. However, each bond can only win one prize, so your holding is reduced for each draw since effectively there are multiple draws, starting with the £1m prizes, then the £100k prizes, etc. Essentially 1 bond for 100 months is functionally identical to 100 bonds for one month.
I’m not sure whether the MSE and other calculators take this into account (IIRC, I didn’t when I wrote my calculator code and got the same answers as the online calculators).
I’d agree that the volatility is large even for a full holding over a year.
Great piece.
I’d like to add (for anyone who might read this in time) that every employee needs independent professional advice to guide them through the layoff. The redundancy process is a complicated game that needs to be played right. Your opponent (HR) knows the game, you don’t. The difference will be thousands in redundancy compensation.
Employment lawyers are prohibitively expensive (I once paid £400 per hour, some 10 years ago; not a typo) which cements the imbalance between HR and employees. I retrospect, I should have joined a union earlier in my career just for the option to get independent advice.
As an alternative, my partner and I have worked with Bluebell HR who were brilliant throughout. Probably a 50x return on a few hours of consultation.
Re: Barrier ETFs: What about the Atlantic House Defined Returns Fund (B GBP Acc), which is an Irish domiciled OEIC that aims to deliver medium to long‑term capital growth by holding a diversified portfolio of equity linked “defined return” autocall structures, primarily referenced to major global equity indices (e.g. Solactive UK Large Cap ex IT, Solactive US Large Cap, Solactive Euro 50), and backed by high quality government and corporate bonds (mainly UK gilts). OCF is about 0.63% for B Acc (platform fact sheet and FT both quote this level). Fund size is around £2.4–2.5bn, with the B GBP Acc share class at roughly £2.1bn. Asset breakdown shows a very high notional exposure to UK government bonds (over 100% of portfolio weight due to derivatives overlay), with negative “Non‑UK bond” exposure reflecting the structured positions. There is negligible direct equity holding because equity exposure is via derivatives. Key risk drivers includes derivative sensitivity to underlying indices (delta, volatility, correlation), counterparty and credit risk on the notes/bonds, interest rate risk in the gilt collateral, FX risk where indices or counterparties are non GBP, and path dependency from the autocall features.