To cut the wage bill, government employees will be offered early retirement without penalties, which means they will be able to access their full pension benefits.
Although details are still to be released by the minister of public administration, indications are that employees from the age of 55 could qualify for early retirement.
Government expects around 30 000 employees to take up the offer, saving about R20.3 billion in wage costs over the next three years.
Funding of R16 billion will be needed to cover the once-off penalties and other retirement-related costs.
This funding will partly be paid from government’s contingency reserve, and the balance will be paid by the Government Employees’ Pension Fund (GEPF).
The GEPF portion will be repaid by the state over a period of time.
Before you leap at the chance of an early retirement, make sure you fully understand the financial implications. Although no penalty would be paid, you still miss out on the contributions to your pension fund that you would have received if you worked until retirement age.
It is important to work out if your current pension income will be enough to fund your expenses.
However, you could use your early retirement to kick-start a career you’re passionate about.
Financial adviser Carlo Gil of Liberty said that the offer could be a good opportunity for government employees to use their skills and experience to start their own businesses.
“Older people with skills and experience tend to be the most successful entrepreneurs. They also have the networks and experience of working with government and state-owned enterprises. This could be a boost for small business,” said Gil.
So, if you take early retirement, don’t think of it as opting out, but rather as an opportunity to start that career you always dreamed of.