The Western Australian State Government has announced 1,100 Public Servants have applied for redundancy in response to the Government’s announcement of a plan to reduce Public Service numbers. It’s widely acknowledged that most of those affected will be GESB (Government Employees Superannuation Board) members, the super and retirement administrators of current and former WA Public Sector workers. According to Michael Heffernan, Actuary and Financial Adviser at Mercer, the GESB schemes are complex and require expert knowledge to help understand their intricacies.
As the former Head of Advice with GESB Financial Advice, Mr Heffernan believes members affected would benefit from specialist advice to determine how to best navigate this next period of their lives.
Mercer is offering the following tips and insights to guide those affected:
- Maximise tax-free status: We understand that most taking redundancies will be in their 50s and likely to be long serving Public Servants and as such, much of your redundancy payment is likely to be tax free (the tax free amount is based on a formula related to years of service). Those parts that are not tax free (including leave payments) will be taxed at a concessional rate.
- Boost super and reduce tax: Redundancy amounts cannot be rolled over to your super. They must be taken in cash and after tax has been deducted. However, it’s important to note that cash can be used to make after tax contributions to your super – which can reduce tax on rollover to retirement.
- Reduce debt: An injection of cash provides an opportunity to pay down debt and/or build up a cash buffer if you plan to return to the workforce, but ensure you have the right plan in place if you don’t plan to return immediately.
- Test the longevity of your savings: If you are planning to retire immediately, you will need longer term projections to determine how long your retirement income will last – will you have enough saved to last you into your 90s? With life expectancy constantly increasing for Australians, it’s likely many will need sufficient retirement income lasting until much later in life.
- Secure your safety net: Personal insurances such as life insurance may cease when you leave the Public Service. Make sure you’ve got the right insurance plan to protect you and your family.
- Be prepared: Make sure you have up to date Wills in place. It’s something we might not think about during this time but it’s a really important step.
- Understand the complexity: Get appropriate advice before you proceed. GESB schemes are generous but complex.
Contact Michael Heffernan or Sam Clark to discuss further.
08 9289 3728
08 9289 3711
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