Pay-off shark alarm: Redundancy victims should delay finance decisions, writes Neasa MacErlean

MINERS and any other people facing redundancy are being warned against accepting the advances of unscrupulous financial advisers.

IFA Promotion - the organisation supposed to promote the role of independent financial advisers - has issued a 10-point guide to help investors find an adviser that they can trust. Fiona Price & Partners recommends avoiding financial advisers who make their money by charging commission.

Fiona Price, the firm's principal, believes that only flat-fee advisers, such as her company, can offer impartial advice. She also believes a short boom is imminent on the back of the mining redundancies. 'When the miners were coming to London to march, there were probably busloads of financial advisers going in the opposite direction.'

Those facing redundancy are advised not to make irrevocable decisions to tie up their pay-offs while still in a state of stress or shock. Redundancy cheques can be left in building society accounts, while their owners take initial steps such as signing on for unemployment benefit.

The Department of Social Security has got wise to the techniques used to reduce capital to below the pounds 8,000 level at which income support is payable in addition to unemployment benefit. A DSS spokesman said: 'If you had an inkling that you were about to be made redundant and went off a few weeks before and bought a pearl necklace, that might be taken into account.'

The DSS recommends that people check with their local benefits adjudication officer to ensure that any intended capital repayments on mortgages do not fall foul of the benefits eligibility rules. In most cases, however, people will find that their entitlement to benefits is not affected by reducing mortgages and other debts.

Signing on for unemployment benefit also ensures that credits continue to be made towards a state pension.

Long-term or medium-term investment vehicles should only be considered once the short- term position becomes clearer. Someone unlikely to find another job might need to use some of the redundancy money to generate a steady income stream. Alternatively, someone likely to find new employment would be entitled to tax relief on the interest on the first pounds 30,000 of their home mortgage, and paying off the mortgage would lose this eligibility.

The North of England Building Society is running a helpline (also available to non-members) between 10am and 7pm, Monday to Friday, on 091514 4196. The IPAF 10-point guide and a list of local independent financial advisers are available on 0483 461461. For pounds 2.50 and a 10x8in sae, Fiona Price & Partners offers a 'Redundancy Survival Kit', which is available from 33 Great Queen Street, London WC2B 5AA.

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