FOOL'S EYE VIEW
Dealing With Unemployment

By Cliff D'Arcy
February 11, 2003

Before joining the Fool in January, I spent the second half of last year out of work. After working in banking and insurance for far too long, I'd decided to change tack and become a writer.

Although my previous employment ended in mid-July, I couldn't register as unemployed until my month's pay in lieu of notice had expired. That day, I visited my local JobCentre Plus, made an appointment and was told to return in a week for my first Jobseeker's interview.

While there, I grabbed a copy of leaflets "WK1: Financial help if you work or are looking for work", "WK2: Financial help if you are looking for work" and "GL23: Social security benefit rates", to see what I could claim.

I returned a week later, after completing a very in-depth form that provided my adviser with all my personal and employment details. I also took along my P45, final payslip and exit letter given to me by my ex-employer, plus my National Insurance number. This helped my adviser to establish which benefits I could claim.

However, thanks to means testing, my options were very limited. Anyone with a partner that works at least 24 hours a week, or with savings of £8,000 or more, cannot claim any means-tested benefit (partner means your spouse or someone living with you as if you were married). Also, anyone who has savings of between £3,000 and £8,000 will have their means-tested benefits reduced on a sliding scale.

Means-tested benefits for the out of work include:

> Income-based Jobseeker's Allowance
> Income Support
> Housing Benefit (paid to tenants)
> Council Tax Benefit
> Income Support for Mortgage Interest (ISMI)

Being a homeowner, I was interested in ISMI. Sadly, even if I could claim means-tested benefits, ISMI would have been a waste of time. For mortgages arranged after 1 October 1995, borrowers receive no state help with their interest payments for 39 weeks (nine months)!

After this point, only the interest on the first £100,000 is paid at a standardised rate, so borrowers with repayment mortgages or paying higher-than-average rates would be out of pocket even while receiving ISMI payments.

My only option was to claim Contributions-based Jobseeker's Allowance (CBJSA). To get CBJSA, I had to agree to attend the JobCentre every two weeks ("signing on") and show proof that I was actively seeking work. In return for this, I would receive the princely sum of £53.95 a week (for the over-25s), paid fortnightly, for up to 26 weeks (six months).

My claim was suspended for a further month, as my ex-employer had paid me one month's holiday pay when I left. Also, there are three "waiting days" at the start of JSA claims, so the clock started ticking on my claim over two months after I'd left work. Worse still, thanks to administrative hiccups, I didn't receive any payments whatsoever until November, almost three months into my claim. It's lucky I had some money put away, or I'd have been living on leftovers!

After I'd been registered for three months, I was invited to a formal interview to review my job-seeking success. It's at this point that the JobCentre start turning the screw by trying to get "customers" to agree to take lower-paid jobs or pursue alternative roles. Luckily, this coincided with my job offer to join the Fool, so I didn't have to attend this meeting or sign on again - wonderful!

Here are my tips on what to do if you find yourself in a similar situation.

1. If you're being made redundant, negotiate with your employer for an enhanced severance package. Any extra money, benefits, goods and services you secure will help keep the wolf from the door. If you must have a car, take your company car as part of your payoff.

2. Put your redundancy money in a high-interest savings account that offers no-strings easy access. Without an income, you can't afford to take risks with your capital.

3. If you have savings tied up or hold shares, you may need to release or sell these to give yourself some "rainy day money" to tide you over.

4. Don't be proud: sign on and apply for every benefit you can immediately. You've paid tax and NI into the nation's finances and have a right to claim when times are hard. The worst thing you can do is ignore the state help available, both financial and practical. The JobCentre can help you change careers, set up in business and, who knows, may even find you your dream job.

5. Dust off your CV, spruce it up and start looking for work in earnest. Keep records of all your calls, letters, etc. to confirm you are actively seeking re-employment.

6. Couples - in or out of work - should claim tax credits, such as Working Tax Credit and the Child Tax Credit (the new names from April 2003).

7. Contact the Inland Revenue to see if you are (or will be) entitled to a tax rebate.

8. Gather together all your financial paperwork and do a Statement of Affairs, listing all your income and expenses. Create a thrifty budget that cuts expenses to the bone then stick to it. On our Living Below Your Means discussion board, clever Fools offer advice on making your money go further.

9. If you're having problems with debt, visit our Get Out of Debt centre for practical advice. You can get advice and help from friendly Fools that frequent our Dealing With Debt and Dealing With Redundancy discussion boards. Also, generous relatives may be able to offer emotional and financial support.

10. If you have a mortgage, keep a roof over your head by making it your first priority after feeding your family. Read How To Avoid Losing Your Home for more information.

11. You may have payment protection insurance policies that cover your mortgage, loans, cards and other debts against unemployment, so check your statements carefully. If you can't see any premiums being paid, call your lender to double check, as they are often bundled in with your loan payments. Fill in a claim form ASAP and, if you believe your claim is genuine and falls within the terms of your policy, don't take no for an answer. These policies are riddled with exclusions and small print so, if your insurer isn't listening to your complaints, contact the Financial Services Ombudsman for advice.

12. When you finally get back into work, pay off your debts as quickly as you can and start saving again. You never know when your next rainy day will arrive!