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Retirement Income – Know Your Options

27 May 2019

In the February 2019 Budget Speech, Finance Minister Tito Mboweni gave details of government’s measures to reduce the public sector wage bill and counter the sluggish economy’s effect on public finances. One of these measures is to allow public servants between the ages of 55 and 59 years to take early retirement, without any negative impact on their pension benefits.

The offer is available from 1 April 2019 until 30 September 2019 and it is estimated that a maximum of 30 000 public sector employees will be considered, provided they meet the criteria of age and other criteria set by each sector department. It’s important to note that this process is completely voluntary and up to the individual concerned whether they wish to apply or not.

National Treasury will carry the cost of any penalties relating to the pensions of those who are approved to take early retirement and the individuals will not suffer any financial loss as a result of taking early retirement.

Why is this offer being made?

Government urgently needs to spend on critical areas such as health, education, social security and infrastructure – and this has to be balanced against its wage bill. Government will ensure, when considering applications for early retirement, that service delivery is not affected and that those with scarce and critical skills, e.g. doctors, are retained.

Those considering taking up this offer should obtain advice from a qualified financial adviser in order to understand the different retirement income solutions available. Each of these solutions has its own advantages and disadvantages – relative to the personal circumstances of the individual concerned. In some instances, combining different solutions may provide a better outcome in the form of a more sustainable, long-term retirement income and the provision of a legacy for dependants.

Retiring as a public servant

The retirement rules of the specific fund will apply. Depending on the number of years’ service with the fund, the following options are available:

  • Cash lump sum only – if less than 10 years’ service
  • Cash lump sum and monthly annuity (income) – if more than 10 years’ service

Proper advice is critical

Navigating the retirement journey alone can be daunting. A qualified financial adviser can look objectively at your financial situation and advise accordingly.