Managing retrenchment

While unions are performing well in negotiating adequate retrenchment and severance packages with employers, in some instances the funds are simply not available. People are being retrenched daily with packages of two months’ salary or less. And unemploym

The bigger picture
Geraldine Bunting of Cheyenne Financial Services, one of the few independent financial planning groups in South Africa, says, “Retrenchment is often a huge emotional shock for people, particularly those who have given a company many years of service. As a nation, South Africa has a dismal record of saving, so there is generally no personal financial cushion for those facing retrenchment. Equally, we are an indebted nation, with household debt running at over 50 cents in the rand earned.”

Bunting says new legislation aiming to protect consumers falls short of the objective in that it does not consider the individual’s entire circumstances. “Trustees of pension funds, for example, have a fiduciary responsibility to present understandable choices to members facing retrenchment or retirement.  But this often extends no further than explaining which outsourced fund manager has been selected to offer products and what those products are.”
 
“The result of these factors is a confused ex-employee facing an uncertain future with a sometimes-sizeable chunk of cash in hand. We have come across many cases where the quality of advice given is, at best, questionable. In one case, a client with a retrenchment package which included a large pension fund payout was advised to invest it all in a long-term insurance product which sounded very attractive on paper. In reality, however, had the advisor looked at the client’s total personal circumstances, the best advice would have been to reduce his very high and very expensive debt levels.”

Holistic approach
Cheyenne Financial Services, says Bunting, takes a holistic approach to financial planning, one that examines immediate needs right through to long-term goals. “If financial planning does not consider the whole spectrum, you cannot give the ‘fit and proper’ advice required by new legislation such as the Financial Advisory and Intermediary Act.” The company, whose principals have over 40 years’ collective experience in the financial services sector, is registered with the Financial Planning Institute and the Association of Trust Companies and is presently being registered with the Financial Services Board.

With sound financial planning, says Bunting, you can make your retrenchment package work a lot harder for you – provided it is part of an overall plan that looks at your entire situation.