For many government employees, the decision to resign or retire is one of the most critical financial and life-changing moments they will ever face. Yet, many find themselves unprepared, misinformed, or lacking the necessary guidance to make the best decision for their future.
Today, we share the journeys of Marlon and Denise, two former public servants who navigated the complex process of leaving their careers. Their experiences shed light on the financial traps and missed opportunities that many government employees encounter when resigning or retiring from the pension fund.
Marlon’s Story: A Costly Resignation Without Guidance
Marlon spent 30 years in the public education sector, climbing the ranks from teacher to principal. When he decided to resign in 2020, he expected to receive proper financial guidance. However, what he encountered was a standard narrative repeated by banks and financial advisors: “When you resign, your money will be paid into your bank account, and 40% will be deducted for tax.”
This lack of tailored advice resulted in a devastating financial loss. He ended up paying over R300,000 in taxes—money he could have legally saved had he received the right guidance. Despite approaching several financial professionals, no one took the time to analyze his specific situation, explore tax-saving strategies, or offer personalized advice.
He had to learn the hard way—through trial and error—about managing his finances post-resignation. He invested his payout into property and bank savings, but the process was filled with uncertainty and self-research. Looking back, Marlon acknowledges that if he had access to the right financial planning, his resignation could have been structured far more efficiently.
Denise’s Journey: Finding the Right Guidance Before Resigning
Unlike Marlon, Denise took a different route. She had been contemplating resignation but felt unsure about the financial implications. The fear of losing a significant portion of her pension to taxes held her back—until she stumbled upon a social media video that changed everything.
Through this video, she discovered a Masterclass that provided in-depth guidance on resignation planning. She realized that with the right knowledge, she could minimize her tax burden and maximize her financial freedom. Determined to make an informed decision, she scheduled a consultation with a specialist, followed the right steps, and implemented the strategies she learned.
The results? Denise was able to save a substantial amount in taxes—far more than she had anticipated. She also structured her investments to create sustainable financial stability, ensuring that she remained in control of her income. Today, she is debt-free, stress-free, and enjoying a new lease on life with improved health and financial security.
The Tax Trap: What Government Employees Need to Know
One of the biggest pitfalls government employees face when resigning is the hefty tax deductions. The standard 40% tax rule is often blindly accepted without questioning whether there are legal ways to reduce this burden.
Denise’s case highlights a critical piece of information that many employees overlook: the pre-1998 pension contributions benefit. This is a tax-saving opportunity that many financial institutions fail to inform retirees and resignees about. By strategically structuring the resignation process, she was able to legally reduce her tax liability to a fraction of what she initially expected.
Unfortunately, Marlon was unaware of this at the time of his resignation, and as a result, he lost hundreds of thousands of rands unnecessarily. This stark contrast between their experiences underscores the importance of obtaining proper financial guidance before making such a life-altering decision.
Why Financial Planning is Crucial for Government Employees
Both Marlon and Denise’s stories emphasize a crucial point: Resignation is not inherently bad—but resigning without a plan can be disastrous.
If you’re a government employee considering resignation or retirement, you must:
- Seek professional guidance – A specialized financial planner who understands the complexities of the pension fund can help you navigate tax implications and maximize your benefits.
- Understand your tax obligations – Don’t blindly accept the standard 40% tax deduction. There may be legal ways to significantly reduce it.
- Have a structured financial plan – Ensure that your pension payout is allocated wisely to sustain your lifestyle without unnecessary financial strain
- Plan for medical aid and other essentials – Many employees forget to factor in post-employment medical aid costs, which can have a major impact on their finances.
- Evaluate all options before deciding – Resignation and retirement each have their pros and cons. The best choice depends on your personal circumstances, financial goals, and long-term security.
Making the Right Decision: Where to Start
If you’re feeling uncertain about your options, start by gathering as much information as possible. Attend financial planning workshops, seek consultations, and educate yourself on the intricate details of resignation versus retirement.
As Marlon wisely noted, “Resignation is only bad if you don’t get the right advice.” With proper planning, you can ensure that your transition out of government service is smooth, financially sound, and empowering.
If you’re contemplating your next steps and need guidance on tax-saving strategies, structuring your pension payout, and securing your financial future, don’t hesitate to reach out for professional advice.
Your future self will thank you for taking the time to make an informed, strategic decision today.
Retirement Wellness SA is an Authorised Financial Services Provider – FSP 31609. This article provides information, not advice.
Disclaimer: This information is not provided by or on behalf of the Government Employees Pension Fund (GEPF). We do not act on behalf of the GEPF.
