Do you know someone like this?
As a Project Manager of a large construction company, Robert understood stress. He regularly worked long hours, made major financial decisions on the go every day and played his role in the rough and tumble of workplace politics.
So Robert was totally unprepared when his boss called him to an urgent meeting with the HR director where he was told that his role was no longer required. Suddenly, his world was turned upside down. Despite his considerable educational qualifications, he couldn’t make sense of his redundancy payment documents, let alone understand the tax treatment of these payments. He struggled to make important financial decisions such as whether to plough his redundancy payment into his mortgage or invest it in super, or use it to provide an income for his family while he was out of work. If he couldn’t find work and ran out of money could he access Centrelink Newstart Allowance? Would it be enough to keep him and his family? His mind was reeling.
Emotionally, it was tough. From fear about future employment to excitement at new career opportunities; from gratitude for finally having time to play games with his children and get involved in the local community to anxiety over his ability to anchor his family’s financial future.
Thankfully Robert was referred to Wybrow and Associates shortly after he received his notice of redundancy. Robert came to see me as soon as he had his Redundancy paperwork, which firstly enabled us to confirm that this paperwork was correct and then for us to work through his options. We developed a roadmap to get his financial life back on track, allowing Robert to focus on finding his next job and look after his family.
Robert had about $500,000- in super but was only 53 and a half and so had another 18 months before he could access it. He said his super hadn’t been doing too well lately and he was worried about that too. He had been too busy working to do much about it. He thought he would use all his $160,000 Redundancy pay out to pay off his mortgage. Then he intended to use the $25,000 in Rec Leave payments and Long Service Leave for his family to live on. He was fairly sure he would get another job quickly but was still nervous about what might be on offer, certainly at his previous salary level and at his age.
When we discussed all the options I advised Robert about the liquid assets waiting period that Centrelink Newstart Allowance has if you receive a lump sum payment. This means that even if you spend your money on living costs and have nothing left you don’t receive a payment until a set waiting period has passed. He was fairly shocked as, while he didn’t want to access Centrelink benefits, he thought of it as a safety net he could rely on.
So in the end we put the Redundancy funds in his mortgage offset account against his home loan. This would reduce his mortgage repayments down to a very minimal level and allowed him access to funds if cashflow proved difficult in the future.
We set up a Self Managed Super Fund for him with more appropriate, less volatile investments. This also meant that he may be able to access his super as a pension in 18 months time if that became necessary. I explained that we would assist him in the ongoing management of the fund and handle the paperwork for him that needed to be done. I also found out that his employer’s insurance cover had a continuation option so we took this up and had his personal insurances placed inside his new Self Managed Super Fund as well. His own fund would now pay these premiums, which meant that he and his family would be protected if he became ill or died. In addition this would free up his cash flow at the same time.
One by one we dealt with all the issues that worried Robert and after discussing the options available Robert was able to choose a pathway that secured his financial life until he could find other employment. As Robert said to me ’Redundancy is not what I would have chosen but I know I have enough money to keep the family and have access to other sources of income I can call on in the future, which is a big relief”.
Robert’s story has become increasingly familiar part of Australia’s employment landscape over the past decade, particularly in the period since the global financial crisis. While it is common for people to look back on their redundancy as the best thing that ever happened to them, it is almost always a time of great upheaval in their lives. It is certainly a time where you need to get rock solid advice as Robert did to get through what was a very difficult time.
Katrina Wybrow Dip FP CFP
Authorised Representative of Fitzpatricks Dealer Group
Wybrow & Associates
Corporate Authorised Representative of Fitzpatricks Dealer Group
Ph 02 61624100
Fax 02 61624101
Unit 5, 8 Phipps Close
Deakin ACT 2600
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