TOP 10 FINANCIAL CHALLENGES FACING MINING/ OIL AND GAS WORKERS

As a business headquartered in Perth, Western Australia, Chapters Retirement Partners enjoys the unique position of working within one of the world’s largest resources industry centres. ?Having worked with many clients in this industry we have built up a deep knowledge of the specific issues and challenges faced by those working in the resources industry and the mining and oil/gas sub sectors.

?

Australian ‘pre retirees’ over 50 years old who are working in resources and wanting to get retirement ready, face not only the usual broader challenges facing those in this age group- but also more specific considerations.??

?

This following list outlines key challenges- identified through our discussions with clients and our broader business network- which we assist our clients with.

?

1.?????? Job Insecurity and Frequent Job Changes

?

Unlike other industries where frequent job/ employer changes might be unusual or frowned upon, this is very common within the resources industry. This could involve changing employees or moving between employment, contracting or labour hire arrangements.? Work is often project or job based and at the conclusion of a project- staff may need to find their next gig. In an industry known for cost control and where revenue is often cyclical and linked to commodity markets/ swings- there is always some concern about ongoing job and income security.? For our clients this means they require a financial expert to discuss a potential job change to assess the impact it will have. It means building buffers to ensure there is financial room between roles. Ensuring that they correctly nominate the right superannuation fund when changing roles and re-establishing any salary sacrifice arrangements where necessary. ?Finally, it means that long term financial planning requires flexibility and for us to amend and recalibrate the long term plan following employment changes while still maintaining positive direction towards long term retirement goals.

?

2.?????? Don’t Want to Waste The Hours Spent Working Away

?

Working in resources, often involves workplaces situated in remote locations, in often uncomfortable conditions far from family, friends and the creature comforts of home. This means an inherent sacrifice by the employee in the resources sector. When we talk to our clients working in the resources industry- they want to make sure those hours away are put to good use and are not wasted. They want to ensure that while they are away working hard that they're putting that extra income to good use and to set themselves up for their future. This means putting away enough to build a good asset base to give them a retirement income and a desirable lifestyle later in life.? For others it might also mean before retirement they are able to drop back to ‘Perth wages’ while finishing their careers or transitioning to retirement- while being home every night.

?

3.?????? Taking Risk

?

When working away in a team of colleagues who spend long periods of time together everyday, many ideas- both good and bad- relating to finances are shared and discussed. Perhaps given the inherent risky nature of some of the work sites in the resources industry- people working in the sector can seem to feel more at ease with risk generally including at times with their finances. We hear many tales of a workmate who said someone should put all their money into crypto or a particular ‘speccy’ mining stock because they made money out of it. Of course, even if it that’s true- that bird has normally already flown, and it is difficult to retain wealth made in this risky fashion. Unfortunately there are just as many cautionary tales of those who have taken that type of financial risk and lost large amounts of wealth in doing so. Like a mining employee we were told about, who said he was going to put 100% of his super savings into a single cryptocurrency investment. In just one year he had destroyed 80% of his retirement wealth! There is nothing wrong in getting some rough ideas or pointers from those you work with relating to finances. But you have to remember these are not qualified experts and also bear no responsibility for the outcomes you experience by following their amateur advice. If you are to allocate funds towards a more high risk investment- then this should only be ever considered with a very small amount of non superannuation savings and should be only money not required for any important expenses- that you can afford to lose. The key is to diversify, to not put all your eggs in one basket and we help our clients to ensure they do have adequate diversification and guardrails in place with their money for their future selves benefit.

?

4.?????? Relationships

?

Working in mining, oil and gas, roles often involve working away and this can cause strain on relationships and for some people may be a cause of an eventual breakup. Others make it work and can even enjoy some time apart! But this is a unique environment for our relationship to exist in. ?Financially as a couple it can be seen as advantageous for someone to be working away as with one member of the couple’s food and living expenses paid for half of the year and an inability to easily spend money in physical shops while working away. However, we have also heard of resentment in couples when one person might be spending money at a higher than comfortable rate. We know that finances and money are a leading cause of relationship problems and so by having a financial adviser to get a couple’s finances on one page, their goals clearly articulated and moving in the right financial direction- ?we can alleviate one major strain that might be prevalent in relationships and particularly those in the mining oil and gas sectors.

?

5.?????? Superannuation Funds

?

In relation to superannuation there are several unique aspects for those working in the resources sector. Firstly, sometimes we see employers who may pay superannuation guarantee payments (mandatory super) at a higher than legislated rate- and this can make it less straightforward to compare the role vs say a higher income, lower super paying role. It also makes salary sacrificing to superannuation within fixed dollar superannuation caps trickier to work out. This is something we help our clients with. Other major resources companies offer the ability to have additional super contributions matched by the employer. This can be a great way of building super tax effectively, but financial advice is needed as this may cause an employee to invertedly exceed legislated superannuation limits without the right guidance. Lastly, there are employer default funds offered by resources companies to their employees which need to be considered against other super funds to ensure the individual member is receiving a good deal on things like superannuation fees. Many clients are shocked to know that the default fund that is easiest for the employer to use and offer is not always the best option for the individual member/ employee.

?

6.?????? Managing Debt

?

Working in mining, oil and gas roles often means attractive incomes compared to those in other industries. These higher incomes often allow higher rates of debt borrowing capacity. This might be used to buy assets like property but also less sensibly- toys, including expensive vehicles.? But just because you can borrow more it doesn't mean that you should. If you do have borrowings, you need a plan to be able to exit those prior to retirement and to know in which order to tackle those. Also, to know whether it is more advantageous to be concentrating after tax surplus income towards debt repayment or could these funds perhaps be contributed to a super fund instead or another investment, or maybe a combination can be more beneficial. We help clients to find the right mix of these so they can get on living their lives but knowing they're going in the right direction.? We also partner with a panel of mortgage experts who can review our client’s debt structures and ensure they're getting the optimal deal from their lenders.

?

7.?????? Unique Financial Benefits and Arrangements

?

An employee can receive a wide range of financial benefits when working in the resource sector, particularly when working with a larger company. This may include discounted or complementary private health insurance- which is very helpful for personal cashflow. Sometimes complementary or partially funded life and disability insurance covers are also offered. We can review these policies for our clients to let them know if there any coverage gaps within this cover and how should we best integrate this with any other life insurance products they have- to find the best outcome for them. Employee share plans also enable an employee to build up a holding in the shares of the employer company sometimes with attractive matching schemes. A big trap we see however is when an employee builds up a large holding of shares of the employer company which can cause issues for taxation and diversification risk with those holdings.

?

8.?????? Travel

?

Working in the resource sector and in particular for those working away FIFO roles, means a lot of travel and airplanes. For some people this is great as they can accumulate large amounts of frequent flyer points and within WA flights typically only take a couple of hours. There also is the ability to combine time off with scheduled swings and rearrange shifts to create extended time off for longer travel during their working life.? For other people though they get tired of this travel and being stuck in airplanes, and this might mean that they are less likely to want to travel by plane in retirement and may instead wish to focus more on domestic and local travel later. It is important then to plan to do the travel when it best suits you and to do the right travel at the right time of life.

?

9.?????? Life & Income insurance

?

Traditionally it was very hard to source quality life and income insurance policies for those working in mining oil and gas roles due to the higher risk nature of their occupations. However, across our panel of major life insurers there is typically one or two insurers that will cover any given role- even the higher risk roles including offshore and underground work. Health of the applicant must also be considered and those working in mining or gas are typically required to do upfront and ongoing employment medicals which can provide us with an idea of their health and the likelihood of obtaining new insurance cover. Typically, life insurers don’t often require medical and blood tests these days, in most cases, but it's important to know that if they do these need to be performed independently of employer medical tests. We also consider any existing life insurance cover a client has and this includes cover that might be built within a superannuation fund, to see whether that should be retained or integrated with another insurance policy. We have successfully helped many clients working in the resource is industry to claim on the life insurance products we have helped to arrange. This includes people who were injured on mine sites both temporarily and permanently as well as those who lost their income due to health events occurring outside of work.

?

10.?? Retire, or Transition but not ‘Unretire’

?

We find that people working in the resource sector typically want to strive for a future full time retirement date or a transition towards retirement. This is different perhaps than in other industries where there may be more of those who wish to ‘unretire’ by reaching financial independence and continuing to work. This may be due to the remote nature of the jobs and for some jobs the physicality involved with them as well- which means people generally do not wish to continue to do those jobs forever and longer than they financially need to. ?In terms of transitioning towards retirement we have had clients who have been able to engage in job share arrangements and we've had those who have transitioned back to a city-based role on less money towards the end of their working life.

Your Retirement- Let us Help You!

????????????? Are you worried that you are missing the boat?

???????????? Hearing mixed messages about finances and retirement?

???????????? Tired of putting off starting to better plan and manage your financial future?

???????????? Lacking financial direction and unsure of what’s next?

???????????? Feel like you are paying too much tax?

???????????? Unsure how to best use your money- debt repayment, super or investment?

???????????? Don’t have time to properly manage your finances?

?

At Chapters Retirement Partners we offer a complimentary initial call with a qualified Australian Financial Adviser.

We will discuss the burning financial issues which you want to overcome, as well as ascertain how we can help and if we should work together.

Click here to book an initial call today: https://calendly.com/finishstrong/15min

This information is general in nature and has been prepared without considering your objectives, financial situation or needs. You should, before acting on any advice, consider its appropriateness to your circumstances (including your objectives, financial situation and needs). You should also consider the relevant PDS before making any decision about any product.