offered redundancy at 62, what are my options?

[morpheus]

Hi,

Not sure if this is the right area to post in.

My Dads been offered redundancy in his job, he was going to retire at 64/65 but he is being offered a lump sum of circa 20,000 euro if he takes redundancy now, the company are trying to downsize.

He is an engineer.

he has only ben paying a pension for the last 10 years or so.

We're wondering what he should do with the 20K, can he invest it into his pension?

Should he invest it elsewhere?

he reckons he will only get about 250 a week for a pension.

we are in the process of locating all required information about his pension over the last 10 years to see how much he actually paid.

Where should we look for further info, who should he talk to?

All advice is greatly appreciated.

 

[Homer]

€20,000 does not sound like a lot for the loss of three years' earnings. Particularly if you allow for the loss of three years' pension accrual as well.

There are lots of issues your Dad would need to consider before deciding whether or not to accept the offer. Off the top of my head, the following occur to me.

1. What type of pension scheme is he in? If it's defined contribution, then it's relatively easy to quantify the loss in future pension rights. If it's defined benefit, he should find out what pension he would get on early retirement and what his projected pension would be if he stayed on until age 65.
2. Would they be prepared to offer an enhanced early retirement pension as part of the deal? (Probably unlikely, but worth asking)
3. If he turns down the offer, is there a danger he could end up leaving with nothing a few months down the line?
4. If he accepts the offer, what are his chances of finding alternative employment? If so, how are his future earnings likely to compare with what he is presently receiving?

I'm sure there are lots of other issues that will be identified by other posters, but on the surface it does not look like a good deal to me.

Regards
Homer

 

[Marathon Man]

€20k isn't huge, particularly as he doesn't appear to have a significant amount in his pension fund. I'm guessing that he will get the lot tax free, given his service. Where to invest depends on his attitude to risk and how long he's prepared to leave it there. The more security he wants, the lower his likely return, and vice-versa.

If he wants to retire, so be it. However he may want to consider doing contract work. There's plenty contract work around for engineers. Meantime he may be able to play hardball with the redundancy offer and hold out for a higher offer.

 

[morpheus]

He has accepted the redundancy package.

He has been on disability benefit for a year before but went back to work. He suffers from post polio syndrome and at the time (early 90's) was told he shouldnt be working full time, however he has never been one to be dependent on the state and went back to full time work but lately its catching up and he is finding it hard to keep up the pace especially as he specialises in heavy plant machinery and specialist tool making on a factory floor.

He has trained in generations of apprentices too though and knows a fair bit about auto mechanical maintenance having stripped down and rebuilt a number of car and lately motorcycle engines and parts.

Therefore he has a few options.

The final sum is 26K payoff.

I need to get somewhere for him to put it ASAP before he becomes the proud owner of a new harley or something. (I kid you not!!) he is quite indifferent with spending money but I want to make sure he does the right thing now so that he isnt short of it, if he cant find anything part time that interests him, or he may end up struggling in the future.

My mother is more realistic about it. She works part time and has always managed the house finances, now she is panicking about it but im trying to reassure her that it will be ok. They own the house outright and its worth over 310K and They have no significant loans. She is 61 and her job is quite handy stress and physically speaking.

He is as we speak gathering the pension information for me.

He also has shares (unknown quantity but proba circa 20K in G.E.) and a small amount of savings (circa 10K).