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 entitlement to Income Related Rent.

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.

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

Payment received before Income Related Rent is granted

Retirement payments do affect the date employment ceased and are included as assessable income.

Note this does not apply to retirement payments received more than 52 weeks after the date the client's employment ceased. Those payments do not affect the date employment ceased and are only included as assessable assets.

Payment received after Income Related Rent is granted

When a client getting Income Related Rent has been working and then gets a retirement payment, this payment is not regarded as assessable income.

However, it will be regarded as an assessable asset for Income Related Rent purposes and may affect any Extra Help the client is getting.

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.

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