Redundancy and Tax Free Pension Lump Sum

[rboyddd]

Hi All,
I hope you can advise please; I have phoned revenue who kindly passed me off to the WRC who in turn have pointed me to the pensions commission... feel I'm being given the run around, so here it is:

Gross Involuntary Redundancy amount calculated at €210,000.
I have seen the SCSB exemption examples (on revenue.ie and WRC.ie) but still have a basic question. If one is aged > 50, is it permissible to use the present value of a pension tax free lump sum amount (max €200,000) to offset against the portion of the €210,000 that is ex-gratia by the employer, thereby fully utilizing the future pension tax free amount now against the non-statutory portion of the redundancy payment that is liable to tax? Effectively, can one utilize a future tax exemption amount against the ex-gratia portion of a redundancy now ?

Are there any restrictions around the pension (company DB pension scheme).

Sorry if this question is not completely clear, first time navigating my way through this scenario.

 

[Conan]

In calculating how much of the redundancy lump sum might be taxable (tax free up to €200,000) you can go the SCSB route. In doing so you can maximize how much of the redundancy lump sum you get tax free immediately, by giving up any right to a future tax free lump sum from your pension fund. Alternatively you can retain the right to get a tax free lump sum from the pension scheme and pay more tax on the redundancy lump sum.
But overall you are limited to €200,000 tax free. The issue is whether you want €200,000 tax free now and waive a future pension lump sum of take a lower net lump sum now and retain the right to the future pension lump sum.

 

[Oisin19]

If the SCSB calc is big enough (ie big salary and long service) you mightn't have to waive the tax free lump sum to get the 200k max and thus receive another 200k when you retire the pension.

OP I'm not sure what you are getting at but I don't think you can do what you are describing. The SCSB just tells you how much of the payment is tax free. However if you are over 50 you could just retire the pension scheme at the same time if needed.

 

[rboyddd]

Thank you.

the SCSB calc is Average Salary over last 3 years X (No. of years service / 15) - 200,000)...

so in my case that is 150,000 X (1.1333) - 200,000 which is Nil.

Fergal19, when you say "retire the pension scheme", can you please elaborate what you mean by that ? Is the suggestion that I would effectively draw on my pension now (at aged 52) in order to avail of the tax free element ?

Thank you