Standard Capital Superannuation Benefit (SCSA)

How is this worked out. I am earning 35k euro and age 60 and plan to retire soon. Can someone work out for me the 'scsb' and explain what it is please?

I thought that SCSB (Standard Capital Superannuation Benefit) only (?) applied to redundancy payments? You may find something of interest in .

Hi scsb

What Clubman says is correct. SCSB applies to payments on loss of office, such as redundancy or voluntary severance payments.

The tax free element of severance payments can be calculated in various ways, one of which is the SCSB. Broadly speaking, the SCSB is 1/15th of your average pay over the last three years multiplied by the number of complete years of service with your current employer. Any tax free lump sum payable from your pension scheme is offset against the SCSB calculation.

If your situation is purely one of retirement, the maximum lump sum depends on whether it's a personal pension or a company pension scheme.

If it's a personal pension, you can take 25% of your pension fund as a lump sum. If it's a company pension, the maximum permitted lump sum is based on your service with your employer and your final pay. It also depends on whether you are retiring at normal retirement age (NRA) or taking early retirement.

If you are retiring at NRA and have completed 20 or more years service with your current employer, you will be entitled under Revenue rules to a lump sum of up to 1.5 times salary. Based on a salary of €35,000 a year, this would give a maximum permitted lump sum of €52,500.

It's possible that the scheme rules may be more restrictive that Revenue limits, in which case the lump sum might be lower. It would also be lower if you are taking early retirement or have less than 20 years service completed.

Regards
Homer

scsb

Thank you both for reply - does this mean that if I was made redundant at age 60 with 41 years service with current employer that I would get a higher tax free lump. I went into the website mentioned by clubman and top slicing was mention.

Which is the best option for me as my pension has no increases in retirement and I hope to take the max 25% lup sum

Re: scsb

Hi scsb

It depends on the exact circumstances in which you leave your employer and the type of pension scheme you have.

If you are made redundant, you may be entitled to statutory redundancy pay, depending on the circumstances. Since 25 May 2003, the amount of statutory redundancy is two weeks' pay per year of service plus an additional week. Pay is your average weekly pay prior to redundancy (I think it's over 18 weeks, but someone else might be able to confirm the details of this), subject to a maximum weekly amount (used to be €507.90, don't know if it's changed). Statutory redundancy pay is tax free and is ignored in calculating your tax on any other payments you receive on leaving service.

In addition, if your employer is paying a severance payment over and above the statutury minimum, you can receive this tax free up to the SCSB (or the basic exemption or increased exemption, if this gives a better result). Any excess over the tax exempt amount is eligible for top slicing relief.

As I said in my earlier posting, SCSB equals 1/15th of your annual average pay multiplied by your complete years of service, less a deduction for any pension lump sum received in
respect of that employment.

If your pension entitlement is under a personal pension, then it is not considered as coming from your employer and is ignored in calculating your SCSB. If it's under a company pension scheme, then the SCSB is reduced by the amount of lump sum you take. If someone is taking the maximum lump sum from their employment, then it is possible that the basic exemption (which ignores any pension lump sum) may give a better result.

Your posting states that your pension does not have any increases in retirement, which suggests that it is a company pension scheme that operates on a defined benefit basis. In that case, it is likely that the maximum permitted lump sum will be service and salary related, rather than 25% of the total pension fund.

Whether or not you should take the lump sum will depend upon the commutation rate (ie. the amount of lump sum you get per €1 pa pension surrendered) and whether or not you are receiving a severance payment.

Having said all the above, very few employees are in a position to influence what their employer will pay them on retirement at 60. So, unless your employer is running a voluntary severance program or you have some way of getting them to make you redundant, it may be a straight choice between taking all your pension as annual income or exchanging part of it for a tax free lump sum.

Regards
Homer

Re: SCSB

This is a very good but quite old thread to which Homer and Clubman have made useful contributions. Some of the information may be a little dated.

I'll be taking redundancy soon and think I will be availing of the SCSB - I'm not a high earner (EU33,000) but have long service - 26 years.

If you use the SCSB formula - is it only that and the statutory element on which you can claim tax relief? It's either that or the basic/increased? Right?

Is pay in lieu of notice taxable in all cases?

I'm a bit confused.