Taking the leap requires exit strategy

The below article was published in The West Australian, Your Money section on Monday, 1st June 2015 

By David Baruffi, Director, Blueprint Wealth

If you are leaving the Western Australian Public service through retirement or redundancy here are some things you ought to know.

Western Australian Government Employees have three superannuation funds:

Gold State Super

Which is a defined benefit fund that closed to new members in 1996, West State Super which closed to new members in 2007 and GESB Superannuation which is available to all new employees. Gold State Super is a non-taxed defined benefit fund. That is, the benefit you receive at retirement is defined (set) by a formulae based on the number of years of membership and your finishing salary.

West State Super

Is a non-taxed accumulation fund which closed to new members in 2007. It differs from other super funds as the fund is not taxed on its contributions or earnings but is taxed at the time of rollover or payout of the benefits.  Withdrawals are taxed; however, some concessions apply up to a limit of $1,355,000’*

GESB Superannuation

Is available to all new employees. It is an accumulation fund that is taxed and invests members’ funds like all modern funds.

All of these funds have one thing in common: once you have left the Public Service you can no longer contribute to the fund. You will need to find a new fund for your new employer contributions.

Another aspect you will want to review upon retirement or redundancy is your insurance. Each fund has an insurance component of:

  • Term Life Insurance (paying a lump sum on death)
  • Total and Permanent Disability Insurance (paying a lump sum if can never work due to disability)
  • Salary Continuance Insurance (which pays you a monthly income is you are unable to work due to illness).

While the Term Life and Total and Permanent Disability Insurance remain in force when you leave the Public Service, the Salary Continuance Insurance ceases.

All of the funds offer retirement and transition-to-retirement pensions. If you are working in the State Public Service there are some very good strategies available for building your retirement nest egg by using these funds.

If you are leaving the Public Service there are a number of items you will need to address:

  • Your insurances – replace your Salary Continuance Insurance as this insurance ceases 120 days after you leave the Public Service.
  • Ensure any new Life & TPD insurances are in place before you cancel your existing cover.  It is becoming increasingly difficult to obtain insurance without loadings or exclusions.  Losing your existing cover may render you underinsured.
  • Investigate the investment options in any new fund thoroughly. While new superannuation funds have a wide range of investments that provide scope for improved returns they come with some risk.

It is always prudent to seek professional help in managing your financial affairs.

*Actual tax depends on age at the time of withdrawal

Blueprint Planning Pty Ltd (ABN 78 097 264 554), trading as Blueprint Wealth, is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Ltd, Australian Financial Services Licensee and Australian Credit Licensee.

This article contains information that is general in nature and does not take into account your objectives, financial situation or needs. Therefore, before making any decision, you should consider the appropriateness of the advice in regards to those matters.