Joining the great resignation? Here are some considerations for your finances

The pandemic has made us all take a step back and evaluate our working lives. Whether that’s working from home a few days a week, going part time or even changing careers altogether.

If you have decided to move jobs or change careers during or after the pandemic, then you are not alone. Many have joined the ‘great resignation’ and changed jobs or left the labour market entirely.

While the UK doesn’t directly measure the ‘quit rate’, we do know that the UK’s redundancy rate has fallen to the lowest level since the mid-1990s, and open vacancies stand at a record high with over 1.2 million jobs open.

A survey of 6,000 workers by the recruitment firm Randstad UK found that almost a quarter of workers are actively planning on changing employers in the near future.

When it comes to changing jobs or careers, it will inevitably change your financial circumstances, maybe just a little but sometimes a lot.

Tracy Crookes, chartered financial planner at Quilter takes us through some of the points to consider when changing careers to ensure your finances are well covered:

Moving jobs? Consider how it could impact your financial plans - Tracy Crookes

What does the job move mean for your financial plan?

“A job move will likely impact your financial plan, particularly if you are changing careers and going to a role that pays you more, or maybe less than your current salary. You’ll need to think about how your new salary and benefits will impact your current lifestyle and future financial plans.

"For example, your new employer may contribute less to your workplace pension scheme than you previously received, meaning you may need to increase your own contributions if you want to maintain the same level of savings for your retirement.”  

Are there any wider benefits you might lose out on with the job move?

“Many employers offer a range of benefits above and beyond a salary and bonus; for example life cover, income protection and critical illness cover. However, not all do and there may well be differences in benefits between your new employer and old employer and it is important to consider the total reward package. If there is a shortfall in cover from your previous arrangement, then this will need to be addressed.”

Does your higher wage now mean your partner will/could stop working?

“If you are moving jobs for a promotion and higher pay, and hope that this means your partner can stop working or reduce their hours, you need to consider what will happen if you fall ill or the worst happens to you. It is equally important to consider how you will manage if something happens to them, for example because they have stopped work to look after your children or an elderly relative. Financial circumstances can change at the drop of a hat in the event of illness or death, so it is important you and your partner are protected so you can maintain the mortgage payments, rent and other essential expenditures if something happens. Life insurance, critical illness cover and income protection would be worth considering, and a financial adviser will be able to talk you through your options.”

Are you thinking of moving or buying your first home soon?

“If you are thinking of moving home or buying your first property a change in career could have an impact. For example, if you have an agreement in principle from a mortgage provider you will need to notify them of the change and check whether they will still be happy to maintain the agreement, particularly if you are changing careers and expect a lower salary in your new role. It is also important to consider your probationary period at your new job, as this may make providers less willing to lend to you during this time.”

Are you making the move to self-employment?

“While the number of self-employed workers has fallen considerably since the start of the pandemic, making the switch to self-employment will still be attractive to many. If this is you, then it will be worth taking a holistic view of your finances and how they might be impacted by self-employment. For example, you might want to ensure you have sufficient cash reserves to cover the initial loss of income and any additional costs associated with setting up a business. Even with the best business plan, unplanned costs can creep in.

“You’ll also need to consider your pension provision, as you’ll no longer receive a workplace pension with employer contributions. Setting up your own personal pension will allow you to continue saving into a retirement pot while potentially benefiting from the tax relief provided by the government, though the amount of tax relief depends on your individual circumstances. Alternatively, depending on your circumstances and if you meet the criteria, a lifetime ISA might also be worth considering as a substitute for a pension. You’ll receive a 25% government bonus on contributions up to £4,000 a year up to the age of 50, and this can be accessed from the age of 60. A financial adviser can discuss your options with you and recommend the most appropriate solution to meet your needs.”

Tracy Crookes is a chartered financial planner at Quilter