Severance Package - Pension Lump Sum NPV

DublinHead54

Registered User
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1,092
Hi,

I have been offered a package by my employer and looking at the tax implications. I have not been with the employer long and thus am looking at the basic exemption + enhanced exemption of 10k.

Under the enhanced exemption of 10k there is an option to waive the right to a pension lump sum in future in order to take the full 10k exemption now. I am not sure how to calculate the NPV of the lump sum of my pension today and can only find help from revenue related to the SCSB method. At this stage there is a relatively modest amount in the pension of 10k, and I am thinking about waiving the right to take the tax free lump sum on the following basis.

  1. Waiving wmy right to a tax free lump-sum is only with respect to the pension with this employer.
  2. My tax free lump-sum is going to come from other pensions I have built up and future pensions.
  3. This existing pension will be rolled into an ARF and drawn down over time rather than needing to take a tax free lump sum.
  4. The balance is modest and I'd rather take the tax benefit now via the ex-gratia payment
I can't see an easy way to calculate net present value because I don't know what the future value is going to be.

Any thoughts?
 
Your pension provider will have to provide the NPV figures. Company should arrange it as part of package. You are right about part 1 and only applying to this pension. Generally the rule is you never waive your right to tax free amount but in certain circumstances it might make sense as in your case.
 
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