4 Resilience to life’s uncertainties

One reality for all of us is that we will, at some point, have to cope with unfortunate and unwelcome events.

These events could include:

• being made redundant or experiencing a big drop in salary (perhaps through taking a new direction with your career)
• a period of long-term ill health
• divorce
• bereavement.

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The image is a drawing of a person sitting at a table. Their laptop is open and their head is on the table, indicating desperation. On the table are three books with a ‘X’ sign above them.

While the financial impact will vary there are some ways in which you can be better prepared for these ‘what if’ events.

Your sickness and redundancy rights

Statutory Sickness Pay (SSP) is paid for a maximum of 28 weeks for eligible employees. After that you may be entitled to other benefits like Employment and Support Allowance (ESA) and Universal Credit (UC). Check what support is also provided by your employer too.

You might also want to consider buying income protection insurance which pays a regular income if you can’t work due to sickness or disability. Critical illness insurance is another option. This type of policy pays you a lump sum if you’re diagnosed with certain conditions.

Your contract of employment should contain any details of redundancy payment rights in addition to the statutory rules on this. Under current rules you must have worked for your former employer for at least two years to get a statutory redundancy payment. The amount you get is related to your age and the number of years of employment at the firm making you redundant up to a cap at 20 years. The maximum statutory redundancy payment is 30 weeks of pay for someone aged 41 or more who worked for at least 20 years at a firm prior to redundancy.

There’s more information via these links:

• Sick pay [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)]
• Redundancy rights

The financial consequences of divorcing

The financial consequences of divorce can vary quite widely as they will reflect the circumstances of the couple.

Any settlement agreed will take into account the ages of the divorcing couple and how long they have been married. Clearly the individual assets of each party are taken into account as well as current incomes and future earnings potential.

Legal guidance is advisable to help ensure a fair settlement. As a guide for a couple who had been married for some time the party that gave up work to raise children might be awarded half the joint assets, a portion of their ex-spouse’s income until retirement and half their pension entitlement.

By contrast a young divorcing couple with no children might just take away what they brought into the marriage.

There’s more information via this link:

• Money and property when you divorce or separate

Preparing for the worst

Losing your partner can have major financial consequences for the household. One obvious way to make provision for this event is through life insurance. Before buying a policy do check to see if your employer is providing life cover for you and how much this amounts to. And do shop around and compare products to make sure you get the cover you need.

When it comes to bereavement, planning ahead also means ensuring that both you and your partner have prepared wills which detail the beneficiaries of your estates. Having a will in place is crucial and avoids any risk that your estate is not distributed as you wish. Additionally you should consider putting in place enduring powers of attorney to ensure that your financial affairs are looked after properly in the later stages of your life when you may have diminished capabilities.

There’s more information via these links:

• Making a will
• Enduring Power of Attorney

Planning ahead also reinforces the need to build up a savings buffer – something we looked at earlier in this course. This can, at least, help cover the immediate financial consequences of life’s adverse events.