Separate €200,000 limits for redundancy and pension lump sums

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Homer

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Apologies if this is answered elsewhere, but I've tried searching the site (and google in general) and haven't been able to find anything definitive.

There is an overall limit of €200,000 on the amount someone can receive tax free on redundancy and a similar limit on pension lump sums. I'm fairly sure there was a proposal some years back to have the €200,000 limit applied in aggregate, but my understanding is that they remain separate.

Can anyone please confirm (or otherwise)? If you can provide chapter and verse, that would be even better.

Many thanks
Homer
 
The tax free lump sum on redundancy is restricted by the present value of the pension lump sum.

So there is a restriction of approx €200k on the total.
 
Joe_90 said:
The tax free lump sum on redundancy is restricted by the present value of the pension lump sum.

So there is a restriction of approx €200k on the total.
Click to expand...

Hi Joe

Thanks for your reply. I know that the SCSB calculation must take into account the present value of any tax free lump sum receivable under the employer's pension scheme, but my question is whether the €200k limit on redundancy is reduced by the amount of the pension lump sum.

For example, if someone with 35 years service and average remuneration of €150,000 per annum over the last three years was receiving a severance payment, their SCSB calculation (prior to adjustment for any pension lump sum would be) €150,000 x 25/15 = €350,000.

If their pension lump sum has a present value of €200,000, this would leave a net SCSB of €150,000. Assuming they don't waive their entitlement to a pension lump sum, can they receive €150,000 tax free severance payment in addition to the €200,000 pension lump sum?
 
Homer said:
Hi Joe

Thanks for your reply. I know that the SCSB calculation must take into account the present value of any tax free lump sum receivable under the employer's pension scheme, but my question is whether the €200k limit on redundancy is reduced by the amount of the pension lump sum.

For example, if someone with 35 years service and average remuneration of €150,000 per annum over the last three years was receiving a severance payment, their SCSB calculation (prior to adjustment for any pension lump sum would be) €150,000 x 25/15 = €350,000.

If their pension lump sum has a present value of €200,000, this would leave a net SCSB of €150,000. Assuming they don't waive their entitlement to a pension lump sum, can they receive €150,000 tax free severance payment in addition to the €200,000 pension lump sum?
Click to expand...

Correct yes. Always confusing though the way it is explained. The calculation of the lump sum PV can be quite generous.
 
You can get both.

I've seen numerous cases where (Remuneration x Service / 15) - €200k has still been greater than €200k.

I came across one particularly wild case where a person was being advised to waive the tax-free pension lump sum, even though it made no sense to do so.
 
Thanks folks. That's what I thought. But the Revenue leaflet doesn't make this clear to me.
 
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