Sadly, retrenchment and layoffs are terms many people are having to come to grips with these days. These terms invoke anxiety and uncertainty, especially when it comes to an understanding of how being retrenched or laid off will affect their Pension or Provident funds as well as the company risk benefits.
If you have been retrenched or laid off, you need to understand all the options available to you, so that you can make informed decisions that best suit you and your family.
One way to help navigate through the uncertainty is to understand what your options are with each decision your employer takes regarding Company Pension / Provident Fund and Company Risk (insurance) products.
Accessing your company Pension / Provident Fund will be one of your options if you are retrenched. However, before you decide to access your funds, you should ask yourself the following questions:
Do I have any savings that I can use for my daily living?
Do I need a short or longer-` term solution?
Do I have debt?
Do I have people that rely on me financially?
Depending on your age, your access is wide-ranging, but there are tax consequences. There are also options to access part of your Pension / Provident Fund and preserve the remainder.
Decisions regarding accessing your Pension / Provident Fund can have varying long-term financial consequences, so it is crucial to understand the implications before making any decisions. The decision to access your Pension/Provident fund should preferably be made after a consultation with your Financial Planner.
If you are laid off, you remain a part of the company and will not be able to access your Pension / Provident Fund. Your employer may offer to still contribute to your Pension / Provident Fund (potentially on your behalf), but this is not mandatory. It’s important to note that if you are laid off, and during your layoff period you find other employment and resign, you will not get the benefit of a retrenchment package. Again, each case is different and discussing what suits your situation best with a Financial Planner is encouraged.
If you have life cover or income replacement cover with your employer, these will fall away if you are retrenched. If you have debt and other responsibilities such as a family, understanding if you can continue with these significant benefits in your own capacity is extremely important. The ability to continue these benefits in your name can be an advantage from a cost and underwriting point of view. Continuing with these benefits in your own capacity when leaving your employer is a decision that your employer would have made at a group level, and needs to be confirmed by your employer. If you do not have this continuation benefit when leaving your employer, you are still able to approach insurers to apply for this cover in your own capacity.
If you are laid off, the consequences of your Company Risk (insurance) products depend on whether your employer will continue with your contributions to the insurer. Again, you can apply for these benefits in your personal capacity directly at insurers.
We encourage you to speak to a Financial Planner so that you understand all options available, as well as the consequences of any decisions you make. Knowledge gives us the confidence to make the right decisions during these uncertain times.
Chartered Wealth Solutions is an authorised financial services provider
(FSP no. 13909)