Retrenchment is a difficult time and fear can cause the affected person to take decisions that are not in their best interests out of lack of knowledge. Far too many people waste a lot of their money especially by paying a lot of tax to SARS because they don’t seek financial advice. Yet others end up penniless and losing their homes because they simple didn’t make the most appropriate decisions about their finances e.g. I have seen some retrenched people transferring their pensions into retirement annuities

Below is a simple list of things that I believe a retrenched person must consider doing. The list is not exhaustive but should cover a lot of basis

  1. Be aware that it might take a while to get another job because of the state of our economy and with this in mind, ensure that you make the most of your pension and severance pay by NOT paying any more tax than you need to. You cannot afford to give away a big chunk of your funds by paying  a high tax bill. I recommend a transfer to a pension or provident preservation fund to avoid / defer tax and you don’t have to worry about what would happen in case you run out of funds as you are allowed 1 withdrawal from the preservation fund before you turn 55
  2. Ensure that your funds last you as long as possible and one of the best ways to do this is to transfer the funds to a high yield investment fund and pay yourself a monthly income from it
  3. Make use of tax free investment funds to reduce your tax liability
  4. Exercise retrenchment protectors on your policies and credit agreements , if you have any. I suggest you check your policies and credit agreements as many people have these protectors but they are not aware of them. If you are planning to settle some of your debts, do not do so without exercising your retrenchment protectors first otherwise you would be wasting all the premiums that you would have been paying over the years
  5. Choose very carefully which debts to settle and which NOT to settle if you don’t have sufficient funds to settle all of your debts. Make sure that you don’t end up with a paid up car and homeless in the future
  6. Claim for UIF as soon as possible
  7. Be aware that there are many fraudsters out there with scams promising you ridiculous rates of return if you invest with them.

For more guidance on what to do if you are facing retrenchment, read the article that I wrote a few years ago, it is still very relevant even today  “Would you know what to do if you or your partner got retrenched?”. http://www.thuthuka-sa.co.za/would-you-know-what-to-do-if-you-or-your-partner-got-retrenched/

IF you are considering retrenching your employees and want us to present to them to offer them talks and personalised guidance, drop us an email on info@thuthuka-sa.co.za or phone us on 011 568 7692