I am being made redundant next month after 20+years with the company and I am trying to calculate my redundancy but my Google searching gives me the standard statutory redundancy calculations but nothing that asks for your PILON, ex-gratia etc information. I will be moving my pension from the company scheme to a prb probably if that means anything. Does a calculator like this exist as a website or spreadsheet anywhere? I thought the ex-gratia was tax free for some reason but now I know it is not so I am a bit worried so I am reading about the Basic, extended and SCSB tax relief but I dont know which if any applies to me. Any help appreciated. Thanks
Is there a redundancy calculator out there that takes PILON, ex-gratia etc into account?
- Thread starter Poormans
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Is your company offering any assistance with this?
This site below should be helpful.
www.citizensinformation.ie
This site below should be helpful.
Taxation of lump sum payments
Lump sum payments in compensation for loss of employment are subject to tax. How is tax calculated and what are your entitlements?
Thanks, so looking at that I would qualify for the SCSB calculation which would be higher than my redundancy because of the 20+ years service meaning I would pay nothing on the ex-gratia but I would pay normal PAYE on the PILON? Do I have to take a pension lump sum to qualify for that? Everyone has told me not to take a lump sum.
Sounds right.
You don't have to do anything. When you calculate the 20 x one year wage (average of last 3) and divide by 15 this gives you a figure. You subtract what the lump sum would be from your pension (25% of current value max) and that gives you your tax free amount on the ex gratia payment. Statutory is separate and fully tax free.
Eg. You earned 50k average over last 3 years so 50 x 20 / 15 = 66.6k
Your pension is worth 100k at the moment so 25% in x years time when you retire will not be more than this will be 25k.
66.6 - 25 = 41.6k
Disclaimer: IANAE - Your pension advisor will give you the exact figure but that's the gist of how they work it out.
Thanks for the information but, sorry but now I am even more confused. What is the 41.6K figure? Is that my tax free limit? So if my ex-gratia is below that 41.6K figure I dont pay tax on it?
What if 25% of my current pension value is more than my "x 20 / 15" calculation? Say my pension was amazingly successful and was 400K (I wish, just rounding to 100K). Now the calc is 66.6 - 100 = -33.4. What does that mean then, I pay full tax on the ex-gratia? Thanks again
Yes in this example.
The second part, I don't know for sure but that is my understanding if you use SCSB. So then you would go back to the basic of 10k plus 760 odd per year of service which in your case is about 25k. You can then opt for the increased exemption of a further 10k but you will not be able to take a tax free lump sum from your current pension on retirement. The extra 10k tax free is usually not a good idea as you are likely to get more than 10k in that when you retire.