The National Treasury’s offer to those interested to retire early from the public service is an excellent opportunity. However, before you accept the proposal there are some things you should consider. The proposal is that you can retire without the usual penalties that would apply if you took early retirement.

When you retire as a government employee, you are entitled to a pension that is calculated using a formula that takes into account your final salary, your years of service, and your age at retirement. Normally if you retire early as a government employee, it costs you in terms of the pension you receive because you have not yet reached retirement age, typically 60, but the offer from Treasury is not to penalise you for retiring early if you are over the age of 55.

However, if you are not yet 60 and nearing the peak of your career in the civil service, you may be due some promotion that will enhance your final salary and that of course could have a significant impact the pension that you are entitled to when you retire. Your decision will therefore impact the pension that is paid to you for many years in retirement and you will need to weigh up your potential to earn an income elsewhere against the position you could be in if you stayed in the civil service.

As any other retiree, if you have more than 10 years of service, you can take a gratuity (cash lump sum) and a monthly annuity for life. As is the case with any other government employee at retirement, you will also have the choice of retiring and receiving a pension from the GEPF or resigning and taking a pension with another provider. This is an important decision, which must also take into account the security of income and the implications for any death benefits, and post-retirement medical subsidy you may receive. You will need advice from a suitably qualified adviser on how to weigh up the pros and cons and make an informed decision in your own best interest and those of your family members. Although the early retirement offer opened on April 1, it could take some time before you are made an offer, so you have time to take advice on what is best for you. You should also be aware that certain exclusions and challenges exist.

Not everyone will qualify

Not everyone qualifies to take advantage of this “golden handshake”. The government had identified certain groups of employees who can take up the offer. If you work for the following service departments, you qualify for consideration:
● South African National Defence Force;
● South African Police Service;
● Department of Correctional Services;
● Department of Education – employed as an educator; or
● Members of the State Security Agency, as per the Intelligence Services Act.
● All the other departments are excluded from this process.

Approval is not certain

If you apply, you are not guaranteed acceptance. An executive authority in each relevant department is responsible for approving your application. Government departments will draw up strategic, human resources and broader budget plans to ensure continuity of work in the departments after those illegible to leave government service do so. As part of this planning, the shortfalls in retirement funding and future budget implications will be determined.

An Early Assessment Retirement Committee (ERAC) will assess the effect of the applications to retire early on regional and departmental budgets. Thereafter a Departmental Early Retirement Moderating Committee (DERMC) will also assess the applications to determine if you should “stay” or “go.”

When will you know?

The early retirement process is set to end on September 31 this year, but we are concerned that with so many tiers of responsibility the process to take longer than the government expects. Any extensions that will have to be publicly communicated. If your application is approved, you will be given 30 days, during which to consider and accept or decline the package offered to you. If you decide to apply, make sure you are properly prepared to consider any offer made to you.

Sphelele Mncube

Head of Investments

Sphelele joined Inkunzi Wealth Group in 2013 and has 9 years’ experience in the investment management industry, having had previously worked for Allan Gray and Regarding Capital Management. Apart from being an active member of our investment team, Sphelele is also responsible for the management of our business. He holds a BCom degree in Economics from the University of Pretoria.