Can I Claim Benefits If I Have Volunteered for Redundancy?

Being able to claim benefits after you have been made redundant is often a vital part of financial survival if you are short of funds.

Taking voluntary redundancy should not hinder your chances of being able to claim benefits, but there are some circumstances in which your redundancy may be affected.

There are mountains of benefits on offer to newly redundant employees and these few questions should help you decide what you are entitled to.

1) How Much Was Your Voluntary Redundancy Pay?

• A) Under £16,000
• B) Just under £16,000
• C) Over £16,000

2) Does Your Partner Work?

• A) No
• B) Yes but less than 24 hours a week
• C) Yes, more than 24 hours a week

3) Are You Able to Work?

• A) No, I took voluntary redundancy because of my health
• B) The work I can do is limited
• C) Yes I am fully capable

4) Do You Plan to Retire?

• A) No
• B) I am considering retiring
• C) Yes, I plan to use voluntary redundancy as a means for retirement

Your Answers

Mostly A – Your Benefit Claims Will Not Be Affected

Voluntary redundancy is normally classed just the same as normal redundancy and you will be viewed the same by the government. Although you have volunteered for redundancy there was still the need to make redundancies by your employer, so in most cases it will be treated the same.

You sound like you would benefit from being able to claim some benefits and this is exactly what you should do. If you did not receive a large lump sum when you took voluntary redundancy or this was less than £16,000 and you don’t have a lot in savings, you should be able to claim jobseeker’s allowance. Even if you are not eligible for contributions based you will be eligible for incomes based.

If you are eligible for jobseeker’s allowance you will also be eligible for employment and support allowance, providing you meet all the necessary criteria. This is normally awarded to households that have no income coming in and those that have a “limited capability for work”.

This benefit works in the same way to jobseeker’s allowance. You may also be eligible for housing and council tax benefit if you are in dire straits with your finances and cannot meet your rental payments.

Mostly B - Your Benefit Claim Could Be Affected

To claim most kinds of benefits you will need to have savings of less than £16,000. Problems often arise when employees opt for voluntary redundancy and receive a substantial payout.

If this combined with your savings means you have savings of over £16,000 you will not be eligible for income based jobseeker’s allowance and you will need to rely on contributions base jobseeker’s allowance, which relies on you having contributed enough national insurance.

If you are considering retiring or giving up work altogether your voluntary redundancy decision will not impact this but you will have to prove to the government that you are unable to work in order to claim any benefits. If you plan to retire your voluntary redundancy package may be taxable if you do not plan to work again.

Mostly C– Some Benefits May Be Off Limits

From your answers it sounds like you may have trouble claiming some types of benefits. This is not necessarily because you have chosen to take voluntary redundancy but it could be because of the impact voluntary redundancy has. If your redundancy pay is over £16,000 this will automatically rule out some types of jobseeker’s allowance. Also if you are planning to use your voluntary redundancy money towards retirement it will be taxable.

If you are financially well off then it is unlikely that you will qualify for any other benefits even if you are facing retirement.

Voluntary redundancy will in most circumstances be classed as any other type of redundancy when it comes to claiming benefits. You should be able to start claiming benefits from the day you are made redundant. What you need to take into consideration is that voluntary redundancy will often result in a heftier payout which could make you financially better off, which in turn could limit the benefits that are available to you.