# Waive or retain right to pension lump sum?



## purplemonkey (24 Dec 2020)

Hi there, I have accepted an offer of redundancy and have been given two options as follows:


*Option A - Retain right to lump sum from pension**Option B - Waive right to lump sum from pension*Ex-gratia payment€86,973€86,973Less tax-free exemption€72,227€84,902_Taxable Amount__€14,747__€2,071_Tax (40%)€5,899€828USC (8%)€1,180€166_Total Tax Deducted__€7,079__€994_

'Tax-free cash from pension scheme at normal retirement age' is listed as €64,170
'Present value of tax-free cash from pension scheme' is listed as €12,676

There seems to be a c. €6k net benefit to taking Option B but is the sensible thing to do to choose Option A? Is it a straightforward decision to choose Option A or does age etc. come into it when making a decision? I am late thirties with hopefully a reasonable prospect of securing similiar employment. I have been working with the company for 13 years and have not previously availed of redundancy. Is it worth getting the view of a financial advisor? Would appreciate any advice or insights you could give me.

Thanks
purplemonkey


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## Gordon Gekko (24 Dec 2020)

It’s a tricky enough area, but here goes...

‘A’ gets you €80k

‘B’ gets you €86k

In order to get that extra €6k, you’re being asked to waive a tax-free payment estimated at €64k, albeit way down the line.

Most people would choose ‘A’.

There is nuance though; because you’ve less than 15 years’ service, you could choose ‘B’, take the higher payment, and then transfer your pension benefits to a PRSA. Assuming that the scheme isn’t winding-up, you’d have to pay an actuary for a nonsensical piece of work called a “Statement of Benefit Comparison” which would cost around €1,500. But once in a PRSA, your pension benefits effectively “forget” that you waived your lump sum rights and you get the second tax-free payment.

Having said that, the net benefits are marginal here, plus the rules could change, so personally I’d choose ‘A’.


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## purplemonkey (26 Dec 2020)

Many thanks Gordon. Option ‘A’ it is!


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## duffer100 (19 May 2021)

Gordon - In my case the the pensions scheme will be wound up as the company is closing. So I will have an option of taking a PRSA (because i have less than 15 years service) or a buyout bond. Is it only the PRSA where waiving the lump sum will be "forgotten" or is that also the case for the buyout bond? 

Do you have a link where these rules are set out?


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## Steven Barrett (19 May 2021)

It only applies to PRSAs. It's in the PRSA legislation if you can find it. But it is there and allowed. There are constantly rumours that the revenue will close this loophole, so I wouldn't delay if you are thinking of doing it. 


Steven
www.bluewaterfp.ie


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## rollingstone (9 Nov 2022)

currently in the middle of the same process, and would appreciate any guidance on the following:

1. Calculation of the SCSB - is it compulsory to sign the waiver for the pension lump sum to avail of SCSB?. If you do not sign the waiver, is your only other option the basic exemption?.
2. Transfer pension benefits to a PRSA - is this at the sole discretion of the employee, or can the employer and/or pension company veto the request?. Also, the above comments mention a period of less than 15 year's service - if your period of service exceeds 15 years, can you not avail of this option?

Thanks.


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## AAAContributor (9 Nov 2022)

rollingstone said:


> if your period of service exceeds 15 years, can you not avail of this option?



At the time of the comments above (2020/2021), you could not. 

The law has been changed since and you can transfer from an occupational scheme to a PRSA with more than 15 years' service:






						Revenue eBrief No. 149/22
					

Revenue Pensions Manual - updates to Chapters 7, 10, 12, 13, 16 and 24




					www.revenue.ie


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## rollingstone (9 Nov 2022)

Thanks for that update AAAContributor


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## magsd57 (10 Nov 2022)

Great to find this thread.  I am in a similar situation.  Made redundant in 2009 during crash, didn't take advice and opted for max redundancy driven by fear (i.e.my age and financial situation).  I am 65 and can now draw down my pension (400k) but may not be eligible for tax free lump sum.  Would appreciate any direction in the area of PRSA.


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