Redundancy Tax Free Exemptions Impact(if any) on DC Pension TFLS

[fayf]

Just wondering if there is any linkage, from a tax free amount given to an Employee as part of a redundancy package, where, noting- Employee did NOT waive their right to a Tax Free Lump Sum, and chose SCSB.

For example,
If an Employee received statutory plus a 50k tax free payment(due to long service) on redundancy, (and did not waive their pension lump sum)does that have any impact, on them being able to receive the maximum 200k tax free amount when they take their DC Pension tax free lump sum.

I had read about a “lifetime limit” of 200k, but not 100% sure, if this includes the tax free exemption on Redundancy, as well as the TFLS on DC Pension.

 

[AAAContributor]

If an Employee received statutory plus a 50k tax free payment(due to long service) on redundancy, (and did not waive their pension lump sum)does that have any impact, on them being able to receive the maximum 200k tax free amount when they take their DC Pension tax free lump sum.

In the scenario you outline above, the individual still has an entitlement to potentially receive a tax free lump sum of up to €200,000 from a pension scheme, notwithstanding that they availed of €50,000 of relief (under Section 201 - see below) on this particular termination of employment.

The individual in your example has used up €50,000 of the €200,000 lifetime maximum amount (for employment terminations) and could avail of up to €150,000 tax free under Section 201 on a future termination package if the maths allowed. An employer who makes a tax free payment on the termination of an employment is required to make a return to Revenue.

Depending on how the stars align for individuals with high earnings and long service, they could potentially receive up to €200,000 on the termination of an employment tax free plus €200,000 as a pension lump sum tax free.

Breakdown of redundancy packages and pensions

As companies are offering a range of redundancy and pension transfer packages to staff and ex-employees, Diarmaid Blake offers essential advice

www.irishexaminer.com

No 39 of 1997, Section 201, Exemptions and reliefs in respect of tax under section 123.

Exemptions and reliefs in respect of tax under section 123.

www.charteredaccountants.ie

 

[fayf]

In the scenario you outline above, the individual still has an entitlement to potentially receive a tax free lump sum of up to €200,000 from a pension scheme, notwithstanding that they availed of €50,000 of relief (under Section 201 - see below) on this particular termination of employment.

The individual in your example has used up €50,000 of the €200,000 lifetime maximum amount (for employment terminations) and could avail of up to €150,000 tax free under Section 201 on a future termination package if the maths allowed. An employer who makes a tax free payment on the termination of an employment is required to make a return to Revenue.

Depending on how the stars align for individuals with high earnings and long service, they could potentially receive up to €200,000 on the termination of an employment tax free plus €200,000 as a pension lump sum tax free.

Breakdown of redundancy packages and pensions

As companies are offering a range of redundancy and pension transfer packages to staff and ex-employees, Diarmaid Blake offers essential advice

www.irishexaminer.com

No 39 of 1997, Section 201, Exemptions and reliefs in respect of tax under section 123.

Exemptions and reliefs in respect of tax under section 123.

www.charteredaccountants.ie

Thanks for clarifying, good to hear the two lifetime limits, are independant of each other !