'people Can Topple Off A Financial Cliff So Easily'
The Independent looks at the rights of the newly jobless and asks how those who fear the worst can prepare for it
Unemployment is back with a bang. The official jobless figure jumped by 60,000 in the three months to the end of June and now stands at 1.67 million. And with recession looming, worse may follow. No wonder the national charity Citizens Advice has told The Independent on Sunday that it is bracing itself for a rush of people seeking help in the wake of redundancy.
That sentiment is echoed by others who deal with the aftermath of job losses.
Under the law, those staff losing their jobs who have a record of more than two years' service at their company are entitled to severance pay. This is capped at £330 for each full year they have worked for their employer. This £330 figure is way below the average national weekly wage and even then it has caveats attached.
With repossessions predicted to rise by 50 per cent this year, Ms Walker says the Government ought to look at reducing the time that jobless homeowners have to wait before they can claim help with their mortgage interest.
Ms Walker also recommends that newly unemployed people take other action to keep their heads above water.
She also suggests taking out cover against redundancy. "One of the first things our debt advisers ask is whether the client has mortgage or credit-card payment protection insurance (PPI). You would be surprised how many people have these products without realising it. If you have them, use them."
However, PPI is a highly controversial area, with consumer groups describing the industry as a "scam" because of the high profit margins achieved by providers and the exclusions on claims that are often buried away in the policy small print.
The critics found support in June when the Competition Commission criticised industry sales tactics and concluded that PPI providers were overcharging their policyholders by a massive £1.4bn a year.
"People should avoid PPI as much as possible," says David Kuo from financial advice website Fool.co.uk.
"It's expensive and is often mis-sold. We have heard of many cases where people don't realise they are taking it out or are sold the insurance despite the fact that they can't possibly make a claim because they are self-employed."
Instead of PPI, Mr Kuo suggests taking out stand-alone income-protection insurance. "The advantage of this is that it pays out an income you can live on, rather than simply servicing debt repayments. What's more, the terms and conditions tend to be fairer and you are covered in cases of accident and illness as well as unemployment. Compared to PPI, it is better value"
However, be aware that income protection only normally pays out between 50 per cent and 75 per cent of the policyholder's weekly wage, so there is still likely to be a shortfall.
"This is where the savings buffer comes in," says Mr Kuo. "When you are made redundant, it's crucial to give yourself some breathing space so that you have the time to find a job that meets your needs."