Retirement payments

A retirement payment is a payment made to an employee on retirement when employment is fully terminated. It may also be known as retiring leave, a retiring allowance or a retiring gratuity.

Common situations that lead to employment terminating due to retirement include:

• the employee's decision
• the terms of a union contract
• the length of service of the employee
• the employer's policy

It is important to differentiate between the types of payments a person gets when their employment ends to know how they affect benefit entitlement.

Retirement payments do not include:

• a payment solely due to a seasonal lay-off
• a payment that depends on the completion of:
  • a fixed-term engagement or
  • an engagement to complete work specified in a contract
• a payment instead of notice terminating the employment
• any payment (including holiday pay) if MSD considers that, but for the termination of the employment, it would have been paid as monetary remuneration of the person
• any payment made by a company, to a director of a company or
• any payment from a superannuation fund or other similar payment

Note some of these other payments may affect the date employment ceased and may be included in the income assessment when calculating the length of the initial stand-down.

Retirement payments can be paid in one or more lump sums or on a periodical basis.

Payment received before a benefit is granted

Retirement payments are included in the assessment of a person's last 26 or 52 weeks' income to determine the length of their initial stand-down).

Retirement payments do affect the date employment ceased.

Payment received after a benefit is granted

When a client receiving a benefit has been working and having their earnings charged then receives a retirement payment, this payment is not regarded as income for benefit purposes.

However, it will be regarded as a cash asset and may affect any Extra Help the client is receiving.

Different rules apply for retirement payments received more than 52 weeks after the person's employment ceased. For more information see:

• Delayed retirement payments

In some situations a person may cease their employment for a reason other than retirement and get a retirement payment as part of their final pay. For example, when a person resigns from their role voluntarily because they want to change careers or have a holiday.

When a person gets a retirement payment as part of their final pay but is not retiring, the retirement payment forms part of their earnings received in the 26 weeks prior to the commencement of benefit.

Retirement pay received when a person is not retiring does not affect the date employment ceased.