Redundancy – How do I make sure I make the right decision?

 

If you are a WA State Public servant you would be aware that the State Government is going through another round redundancies, making this the third time in 5 years that you may have an opportunity to take advantage of the generous lump-sum payouts being offered.

In determining whether you should take a redundancy, there are a number of variables that should be considered before making your decision:

1: Does the payment fit into my short, medium and long-term financial goals?

The key to making the most of your finances is as simple as making sure that the financial decisions you make, fit in with your short, medium and long term goals. When considering a redundancy, a number of factors come into play, such as;

  • your overall financial position
  • your current life stage (eg. are you close to retirement)
  • your alternative employment or redeployment options
  • your existing debt position
  • whether your partner wants you home!

2: How does the redundancy process work?

If you are a potential redundancy candidate, your relevant Department should have informed you of their process and how you should proceed. In most cases, you will be asked to make an application for voluntary severance, which will then be considered by the Public Sector Commission.

The Public Sector Commission will then make a decision on approving the offer of redundancy, and you will have a period of time (usually a couple of weeks) to either accept or decline the offer, after which a date will be set for you leaving the department.

3: How much tax will I pay?

This depends on your specific situation. On receipt of your application, the Public Sector Commission should provide a benefit estimate to
assist in determining the tax your will pay. Redundancies are not able to be rolled into superannuation before tax, however you may still be eligible to make an after-tax contribution to your superannuation.

4: What about my Gold State account?

If you are a Gold State superannuation member, after your last day of employment, your Department will notify GESB that you are no longer an employee. GESB will then commence the process of confirming your salary on your relevant selection dates to determine the final Gold State benefit.

Once this calculation has been completed, your Gold State superannuation will move to ‘Deferred’ status. While in deferred status, your Gold State account will earn a rate of return equivalent to Perth CPI plus 2% (if you are over age 55) or Perth CPI plus 1% (if you are under age 55) while you decide what to do with your super.

5: And my West State/GESB Super account?

Your West State super or GESB superannuation account will continue as normal. If you retire as a result of the redundancy payment, you may be able to access your superannuation as either a lump sum or Account-Based Pension. If you have Life and Total and Permanent Disability insurance within these accounts, it will also continue. Salary Continuance insurance however will cease after 120 days.

6: Is there anything else I need to be aware of?

Yes, a multitude of things. In particular, if you are a Gold State or West State superannuation member with pre 1983 service, you may be able to use your redundancy payment to reduce the amount of benefit tax you pay on your super.

You should also be aware of the relevant limits on contributing to superannuation should you decide to make a contribution to your superannuation fund. On top of this, different Centrelink rules may apply depending on your age and circumstances. If you are considering a redundancy, now is a perfect time to consider receiving good financial advice.

What next?

If you would like advice on any aspect of your situation relating to your redundancy payment, please call us for an obligation free first appointment on (08) 9316 3050. Profusion Planning specialise in helping GESB members achieve their financial goals, whether that involves retirement, redundancy or any other aspect of financial planning.