Present Value Lump Sum, PVLS

[GAFFRS]

Hi,
I have a question regarding "Retaining the right to a pension lump sum"
I have worked for 3 companies A, B & C.
· "A" in 1998
· "B" 1998 - 2005
· "C" 2006 - 2017

I moved from A to B and transferred in my Pension. In 2005 I was made redundant from B, a PVLS was calculated and I retained my right to the Lump Sum.
In 2006 I started working for company C and transferred in my pension. I'm being made redundant again, but in the PVLS calculation my service of companies A + B + C is being used to calculate the PVLS.
Is this correct?
I would have assumes that as I had already "Retained the right" to the lump sum of A+B, then it would not be factored into my latest redundancy PVLS calculation. In theory by calculating the PVLS of A+B+C I am loosing my tax exemptions twice for the A+B pension transfer.
I'd appreciate any help as I have searched revenue & various websites but can't get clarification on my case.

 

[Steven Barrett]

I don't calculate present values lump sums but from a pension transfer point of view, when you transfer funds from previous employment, both the benefits and the time served transfer to the new scheme.

So the benefits are part of the new scheme and you have to mature them at the same time as the new scheme benefits. The time in that if you transfer benefits and had more than two years service in the previous scheme, once those funds hit, you get immediate vesting of your new scheme benefits and don't have to wait two years.

So I can certainly see why they are applying your previous employment. If you didn't transfer the benefits, they wouldn't have been included in the calculations.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[JoeRoberts]

On the face of it, it seems a logical question.
Certainly appears to be an element of double penalty as your previous redundancies presumably suffered higher tax. But probably not by much as the PV often works out quite small.

Worth investigating more, ask the payroll/hr dept to reconfirm with actuary.

 

[GAFFRS]

from a pension transfer point of view, when you transfer funds from previous employment, both the benefits and the time served transfer to the new scheme.

So would the transferred fund still retain the benefit which I choose for it at the time, namely "Retain the right to a pension lump sum".

On the face of it, it seems a logical question.
Certainly appears to be an element of double penalty as your previous redundancies presumably suffered higher tax. But probably not by much as the PV often works out quite small.

What do you consider small, approx €700-1000 affect on this redundancy (the net affect on 2005 redundancy would have been €0 as the exemptions > severance, but it's costing me on the 2017 redundancy). The tax exemptions were reduced on both my previous redundancy (- PVLS of "A+B" pot in 2005) and current redundancy (- PVLS of "A+B+C" pot in 2017). In fact the total cost to my overall tax exemptions (on both redundancies) would be approx x3 times the PVLS quoted after company B (as the current PVLS value for the A+B pension is now double the value it would have been back in 2005).

On the face of it, it seems a logical question.
Worth investigating more, ask the payroll/hr dept to reconfirm with actuary.

I have done, I spoke with HR (who didn't know), they put me in contact with the Actuary who confirmed their calculations was to use A + B + C to calculate the PVLS.

 

[Joe_90]

My take on this is that the tax free lump sum on retirement will always restrict the SCSB where you do not waive it.

So in Principal if your TFLS is €100k in 2037 years it will effect both the 2005 and 2017 SCSB calculations.

 

[JoeRoberts]

If you paid no tax on the previous redundancies then you have no case. You have lost nothing. No double counting occurred.

 

[GAFFRS]

My take on this is that the tax free lump sum on retirement will always restrict the SCSB where you do not waive it.

So in Principal if your TFLS is €100k in 2037 years it will effect both the 2005 and 2017 SCSB calculations.

True, but if I didn't transfer my 2005 pension then I would have retained the right on the 2005 lump, and for the 2017 lump my tax exemptions would ONLY be affected by company C (and NOT A+B+C).

If you paid no tax on the previous redundancies then you have no case. You have lost nothing. No double counting occurred.

I don't believe that's necessarily true. My tax exemption were affected on both redundancies, just because my exemptions exceeded my severance does alter the fact that I physically "Retained" my tax free lump sum in 2005 for Pension A+B, so why should I be paying to Retain it now as part of the 2017 redundancy as it was already factored into my 2005 calculations?
As mentioned above, if I hadn't transfer my 2005 pension then I would have retained the right on the 2005 lump, and for the 2017 lump my tax exemptions would ONLY be affected by company C (and NOT A+B+C which is the way they are being currently calculated).

 

[JoeRoberts]

True, but if I didn't transfer my 2005 pension then I would have retained the right on the 2005 lump, and for the 2017 lump my tax exemptions would ONLY be affected by company C (and NOT A+B+C).


I don't believe that's necessarily true. My tax exemption were affected on both redundancies, just because my exemptions exceeded my severance does alter the fact that I physically "Retained" my tax free lump sum in 2005 for Pension A+B, so why should I be paying to Retain it now as part of the 2017 redundancy as it was already factored into my 2005 calculations?
As mentioned above, if I hadn't transfer my 2005 pension then I would have retained the right on the 2005 lump, and for the 2017 lump my tax exemptions would ONLY be affected by company C (and NOT A+B+C which is the way they are being currently calculated).

https://www.charteredaccountants.ie/taxsource/1997/en/act/pub/0039/nfg/sched3-nfg.html

Have a read of part 2 here.
I was in a similar ( but not identical) position to yourself a while back. Never found the right answer..