Twenty-eight female guards were unfairly dismissed by a security company because the client‚ Metrora.
Unfortunately retrenchment is a very real issue facing many workers today and one hears almost daily of companies who are undergoing retrenchment exercises. If you are one of those people who are being retrenched, then it is of vital importance to understand what your options are and the consequences of which option you choose.
The two most important questions you need to ask if you find yourself in this position are:
l What to do with the money saved in your pension/provident fund?
l What to do about the group life and disability cover that you have got with your company?
One basically has four choices:
l Take the benefits in cash after paying tax. If the benefit is taken in cash, then the first R1800 is tax free (unless previously taken) and the balance is taxed at a member's average tax rate.
l Move to the new employer's pension or provident fund. The fund value is transferred tax free from the current fund to the new employer's fund.
l Move to a pension or provident preservation fund - the fund value is transferred tax free from the current employer's fund to a participating preservation fund in the name of the member.
l Move to a retirement annuity - the member may transfer his/her fund value tax free from the current employer's retirement fund to a retirement annuity
All of the above options have their distinct advantages and disadvantages and tax implications and it is important to discuss the different options with your financial adviser to see how it all fits together with your puzzle pieces.
The second important consideration is replacing the benefits you used to enjoy on the group life scheme, namely
a) Death benefit / life cover
b) Disability cover
c) Dread disease
d) Any other ancillary benefits, eg. funeral cover
In some cases, an individual may struggle to get the same level of cover he was used to with his company, especially in cases where one's health is not optimal - one would pay a much higher premium to enjoy the same level of cover. It is advisable to check whether there is a continuation option available on the scheme you are leaving, which will allow you to take over the cover and the premium in your personal capacity. Often the only additional medical information that is needed to take up this option is a negative HIV test.
It is advisable to check exactly what benefits are in place on your current scheme and what the benefits may be on a new scheme. It is then advisable to check how the changes will affect you and your family. If you are in this position, then consult a financial adviser about the changes.
l Bryan Hirsch is a director of Pioneer Financial Planning. Visit www.pioneer.co.za