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RedundancyWork and employment patterns have changed enormously in recent decades. Few people now expect to stay in the same job for life, and most people will experience a number of job and career changes. Usually this is the result of their own choice, but many people will also experience job redundancy.
Redundancy may be voluntary or involuntary. In the long term, some people are lucky enough to find redundancy to be a positive experience. It may lead to a better job, new skills, and greater career choice in the future.
In the short term, redundancy will lead to some level of financial and emotional stress. Unfortunately, it is during this most stressful time that many important decisions need to be made, and it may be necessary to obtain advice from a number of different professionals. Some of the issues that may need to be dealt with include:
- Termination payments. Termination payments received as a result of redundancy receive special tax treatment. The best use for a redundancy payment will depend on personal circumstances. For many, a termination payment may be the main means of meeting living expenses for a period of time. For others, it may be an unexpected bonus.
- Budgeting. Even with the extra money from a termination payment, the family budget is likely to come under pressure.
Now is the time to look very carefully at the money that comes into the household, and how much you spend. It may be necessary to cut back on non-essential spending in order to meet unavoidable expenses until a new job is found. It will be helpful to prepare a household budget. This will answer questions such as: - What is the household income from all sources?
- How much do you spend and on what?
- How long will a termination payment fund any gap?
- Where can you make savings until new work is found?
- A new job or a new career? Looking for work will be a priority for many people. Others will consider early retirement, or starting up a business. These are major and potentially stressful decisions, and should only be made after careful consideration. Career counselling may prove invaluable in helping you make the right decision. Many employers or industrial agreements provide outplacement or job transition support as part of the termination package. If this is available, make full use of the assistance provided.
- Centrelink benefits. You may be eligible for Centrelink benefits whilst looking for work or undergoing re-training. Eligibility for government payments is affected by a number of things, including termination payments, spouse or partner income and your level of financial assets.
- Superannuation. Now is the ideal time to review your superannuation arrangements, to ensure they are the best for you. Some super funds require you to move your benefit to a new fund following termination of employment. In other cases it is better to leave your super where it is.
Can you access your benefit? Ideally, superannuation should be maintained until retirement. However, depending on your age and the components of your super account, it maybe possible to access some of your benefit before retirement. Limited amounts can be accessed in cases of severe financial hardship.
If you are over 55, you maybe able to commence a pension from your super fund. You can do this even if you are still working, or looking for work. This is called Transition to Retirement. - Insurance. Now is also a good time to review your insurances, as some disability policies apply different definitions of incapacity to those who are not employed. Life and disability insurance is often a part of superannuation cover. When moving from one fund to another, it is important to ensure appropriate insurance cover is maintained. It is also important to highlight that some superannuation funds will cancel your insurance shortly after you cease work. If you have any medical conditions you may not be able to obtain life insurance again.
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We can help you turn your redundancy into an opportunity. To speak with one of our experienced financial planners, just call us on 1300 131 809 or Contact Us via this website.
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