Should I pay off mortgage with redundancy lump sum?

QI AM employed by a company which is downsizing or may close completely. I’ve been employed since 1981 with the same company and there is a voluntary redundancy scheme in place, for which I would receive around €110,000 — plus a pension gratuity of about €60,000.

I am 55 years of age and the normal retirement age in my job is 65 — with a very limited option to remain until 66 years of age. I have a 25-year mortgage, taken out in 2007, with a balance of approximately €100,000. I have a number of questions.

First: I have a tracker mortgage with a very low interest rate of about 2pc. If I were to take redundancy, should I repay the mortgage in full?

Second: I understand I will receive social welfare payments in my first nine months of being made redundant. Can you offer any advice on any social welfare payment I would receive after the nine-month period — and whether it is means-tested?

Third: As the company may offer compulsory redundancy later, would I be better off to wait and see if it will offer compulsory redundancy or not before I make my decision? Danny, Co Laois IN RESPONSE to your first question, based on the information that you have provided around a voluntary redundancy and a payment of €110,000, I am assuming that you have calculated this as a net amount. The clearing of debt and particularly debt associated with home ownership should always be closely looked at.

It is difficult to advise you to use €100,000 from a €110,000 redundancy for one expenditure — without looking at your broader planning, cashflow and responsibilities.

For example, do you have more expensive debts outstanding — such as a car loan, credit card debt or a credit union loan? If so, these are almost certainly more expensive to service and should be prioritised.

Another issue to address is the cashflow which you will have once employment stops. You reference the company pension and the state benefit, but these need to be examined in greater detail to be sure that your lifestyle can be maintained by these payments.

You state that you have worked with the same employer since 1981 and that you are still only 55. Will there be opportunities for re-employment with your experience and skills?

There may be a requirement for you to use some of the redundancy funds to reskill for future employment.

You are correct to acknowledge the advantage of the tracker rate that you have. This tracker rate can continue to be used to your advantage.

Before clearing this loan though, it is vital that you look at your wider cashflow planning first.

In response to your second question, on the social welfare payments you would be entitled to after redundancy, employees who take a voluntary redundancy are entitled to claim jobseeker’s benefit and cannot be disqualified from seeking to claim that benefit because they volunteered for redundancy.

(Those under 55 who get a redundancy payment of more than €50,000 are disqualified from claiming jobseeker’s benefit for a certain period of time. However, as you are already 55, this does not apply to you.)

You state that you are a single adult and haven’t referenced having children in your letter.

In this case, you would be entitled to a jobseeker’s benefit payment of up to €203 per week for nine months, depending on your average weekly earnings in the governing contribution year (the last complete year that you made social insurance contributions for before you claimed jobseeker’s benefit).

To get jobseeker’s benefit, you must have enough social insurance (PRSI) contributions.

Based on the information provided by you of working since 1981, this should be easily met.

At the end of the nine months of jobseeker’s benefit, you may apply for the jobseeker’s allowance.

To get the jobseeker’s allowance, you must pass a means test. A means test is when your income is calculated to see whether it falls below a certain level.

You reference that you have a partner that lives with you. Be aware that a cohabitant’s income from work or other sources is considered for the means test.

Separate to this, the state pension age is currently 66. As this will rise to 68 in 2028, you will be eligible for the state pension when you turn 68.

In your third question, you ask if it would be better to wait to see if compulsory redundancy were offered.

Under the Redundancy Payments Act, an eligible employee who is declared redundant is entitled to two weeks’ statutory redundancy payment for every year of service. All of this is based on gross pay — subject to a weekly maximum of €600.

As an example, if you were to work for a further five years, the statutory redundancy would equate to 10 weeks extra of payments.

It is important to note that the voluntary package on offer now may not be on offer if redundancy becomes compulsory in a few years.

There is no requirement on the employer to provide more than the statutory redundancy terms.

Quite often, the company may offer incentives under a voluntary scheme for staff to avail of a redundancy offer.

There is no guarantee that a future package will be as attractive.

Cohabitation & pension

QI AM not married but I have a partner who lives with me. It was a condition of my company pension scheme that I join a spouse’s and children’s pension scheme. Will my partner qualify for any pension under my company scheme — and if not, can she or we do anything now so she would qualify? John, Co Meath COHABITATION is becoming increasingly common as an alternative to marriage or civil partnership relationships.

The most significant difference is that a cohabitee relationship has not been recognised legally. The letter of the law states that cohabitees do not have the same rights in law as married couples or civil partners.

Under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, however, a redress scheme has been introduced for cohabiting couples. The redress scheme gives a similar range of orders as are available to married couples when they separate or divorce.

The scheme states that a financially dependent cohabitant may be able to apply to the courts for redress if the relationship ends on death or otherwise. In order to apply for redress, you must be a qualified cohabitant. That is, you must have been a cohabitant for at least five years or a cohabitant for two years if you have had a child with your partner.

If your partner is shown to be a qualified cohabitant, she could apply for a pension adjustment order in relation to your retirement income.

It would be worth clarifying the scheme rules with your employer, and seeking legal advice for clarity on any changes that may be required for her to qualify for your pension.