Home' Trinidad and Tobago Guardian : June 22nd 2014 Contents Financial windfall
comes in many
forms. For the very
lucky few, it could
be winning the
lottery. For many
others, it is usually
the result of more
mundane events, an inheritance, or a
decision to accept voluntary separation
and early retirement programme
(VSEP) as some 608 TSTT workers
In an interview with the Sunday
Business Guardian last week, the com-
pany's current CEO George Hill said
the company's five-year strategic plan
called for a significant reduction of
The National Enterprises Ltd, which
is TSTT's 51-per cent shareholder, said
in a release that these employees will
benefit from packages that will cost
$650 million in total.
Company officials were reluctant
to give average dollar amounts, citing
the privacy and security of workers.
However, John Julien, the president of
the Communications Workers Union,
TSTT's representative body gave an
idea of how the formula for arriving
at the packages worked.
"Security will receive three months'
salary for every year they have worked
at the company, while senior staffers
and managers will receive four months'
salary for every year worked. Therefore,
if someone has a salary of about
$10,000 a month and works for 10
years, their payment would be
At the opposite end of the scale,
Julien said top managerial staff, who
earned salaries of about $100,000 per
month could potentially go home with
Employees who opt for the package
will have access to a retraining benefit,
partially sponsored by TSTT, which
will allow them to re-tool for another
career. They will also be given "finan-
cial counselling" to help them plan
for the future.
For many of the employees accept-
ing VSEP, that future will be stripped
of a regular pay check at the end of
the month. With lump sum payments
for workers amounting to the hundreds
of thousands of dollars and even mil-
lions, the question now is: what to do
with the money?
Others too who find themselves in
this position wonder what should they
do. Should the money be invested?
What investments will provide returns
that ensure current standard of living
yet beat future inflation?
Should the money be used to pay
off debt, for example credit cards or
more long-term borrowing like a
The answer is...it depends
Speaking with several investment
advisors, the Sunday BG learned that
solutions were aligned to personal cir-
cumstances. Among the factors that
local investment experts said should
be taken into account were age at the
time of accepting the package, the
length of the remaining mortgage,
general level of health, appetite for
risk and whether the former employee
intended to find another job. All of
these, must be plotted against an
Jason Julien, general manager at
First Citizens Investment Services,
said the investment horizon is the
length of time that someone intends
to hold an investment.
"If you are talking about a fixed
deposit and it is fixed for three months,
then the investment horizon is three
months. If you are thinking about
buying a bond and you want to hold
that bond until maturity and that bond
is ten years, then your investment
horizon is ten years."
Julien said younger employees may
be better off continuing with their
mortgages and investing the money,
since their investment horizons were
likely to be longer than the older work-
er. Essentially, they would have more
time to realise returns on their invest-
ments. Julien said that older workers
with five years and less to go to the
end of their mortgage could consider
paying it off.
"It may make sense for them to free
themselves of that debt versus save
the money. What that does now, it
means that they now have an asset
that is unencumbered which they can
now do many different things with.
One, they don't have to worry about
the monthly instalments of a mortgage
and two, they now have a valuable
asset, which is a store of wealth."
This opens up further options for
an older worker, said Julien. Owning
their home free and clear, they can
now decide to sell it and get something
smaller if all of their children have
moved out. They can also pass on the
earnings from the sale to their children.
Or they can invest it.
Whether younger or older, the
choice to invest has to take prevailing
interest rates into account.
SBG4 | NEWS
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt JUNE 22 • 2014
What to do
with a lump sum?
Continued on Page 5
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