Can I Claim Benefits if I Have Volunteered for Redundancy?

Contribution-based and means-tested benefits

If you've agreed to voluntary redundancy, or you're weighing it up, you'll want to know what financial support is available. Taking voluntary redundancy doesn't stop you claiming benefits. The rules are the same as for any other redundancy. What matters is which benefit you're claiming, your National Insurance record, and in some cases your savings or redundancy pay.

Out-of-work benefits split into two camps:

• New-style (contribution-based) benefits. These rest on the National Insurance contributions you've paid in the relevant tax years. Your savings and any redundancy lump sum don't affect them. Nor does a partner's income.
• Means-tested benefits. These look at your household income and capital. For most new claimants, Universal Credit has replaced the older means-tested benefits such as income-based Jobseeker's Allowance and income-related Employment and Support Allowance, both now closed to new claims.

Most people leaving work through redundancy will be looking at new-style Jobseeker's Allowance, new-style Employment and Support Allowance, or Universal Credit. Sometimes you can claim a new-style benefit alongside Universal Credit.

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New-style Jobseeker's Allowance and Employment and Support Allowance

New-style Jobseeker's Allowance (JSA) is for people who are out of work, or working very limited hours, and are available for and actively seeking work. To qualify, you usually need enough Class 1 National Insurance contributions in the last two full tax years before the year you claim. Many employees who've been working steadily will meet this test.

Your redundancy pay doesn't stop you claiming new-style JSA, and neither do your savings. This is one of the most common misunderstandings: a large redundancy lump sum sitting in your bank account will not reduce or block a new-style JSA claim. What can affect the amount you receive is private pension income above a small disregard, plus any part-time earnings. New-style JSA is paid for a limited period: see GOV.UK for the exact length.

New-style Employment and Support Allowance (ESA) is the equivalent for people who aren't fit for work because of illness or disability. Like new-style JSA, it's based on your National Insurance record, and savings and redundancy pay don't affect entitlement. You'll need medical evidence and a work capability assessment. If you don't have enough NI contributions for new-style ESA, you would normally claim Universal Credit instead.

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Universal Credit and your redundancy pay

Universal Credit is the main means-tested benefit for working-age people. It's paid monthly and can include amounts for housing costs, children, and limited capability for work. Unlike new-style JSA and ESA, Universal Credit takes account of your household income and capital.

This is where redundancy pay matters. The rules work in stages:

• If your capital (savings, redundancy lump sum, and most other money you hold) is above the upper capital limit, you can't claim Universal Credit at all.
• If your capital sits between the lower and upper limits, you can still claim, but a tariff income is assumed from your savings, which reduces your monthly award.
• If your capital is below the lower limit, it's ignored.

The current upper and lower capital limits are on GOV.UK. If your redundancy payment pushes you above the upper limit, a Universal Credit claim will not succeed until your capital has dropped. Many people in this position rely on new-style JSA or new-style ESA in the meantime. Run a benefits calculation again as your savings come down: people who start out over the threshold often become eligible for Universal Credit later.

Sanctions and other support

When you claim Jobseeker's Allowance or Universal Credit, the Jobcentre will ask why your last job ended. If they decide you left work voluntarily without good reason, they can apply a sanction, suspending some or all of your benefit.

In practice, genuine redundancy is usually accepted, even where you put your name forward, provided the role was genuinely going and the employer was making redundancies. Voluntary redundancy isn't the same as resigning. Keep your redundancy paperwork, including any letter setting out the reason and terms, in case the Jobcentre asks. Sanction lengths vary: GOV.UK has the current detail.

Other support worth checking:

• Council Tax Reduction: run by your local council, with its own rules on income and savings.
• Help with mortgage interest: available as a loan in some circumstances for Universal Credit claimants.
• Pension Credit: if you're over State Pension age and on a low income.
• NHS and other passported help: free prescriptions, dental treatment and similar support may be available depending on your benefit.

Before you claim: check your National Insurance record so you know whether new-style JSA or ESA is open to you; add up your capital, including the redundancy payment, before applying for Universal Credit; keep your redundancy letter and settlement paperwork; and use an independent benefits calculator to compare what you might receive. Check GOV.UK for current contribution conditions, capital limits and sanction rules.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Redundancy Action Plan lets you tell us about your situation and get a personalised step-by-step plan for dealing with redundancy. Covers finances, job hunting, benefits, and wellbeing. Try it now →