Severence Lump Sum & Pension Implication

C

Cantona7

Registered User
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120
Hi
I am a member of a DB scheme and will be leaving the company after 20 yrs service.

It is not a retirement senario. I am being offered a severence package and a lump sum is being offered.

The company is now telling me that if i accept this tax free lump sum payment, I will be prevented from receiving, from my pension fund, a future lump sum payment when I retire.

Is this the case?

Any info would be appreciated.
 
Hi Cantona

The scenario is that you can take a tax-free lump-sum of (A*B)/15 - C...if you want to decline to ever take a tax-free lump-sum from your pension then they can set C to equal 0 (so you get more tax free now) - but if you have not signed such a waiver then they should not be saying this to you, it is your choice, not their choice.
 
Hi Cantona,

Is this a redundancy situtation or is it a straight up severance payment? (read up more on redundancy in the Work/Careers forum)

Under the rules of your scheme is there provision for a tax free gratuity/lumpsum? (search in the pensions forum for information on deferred benefits)

If this is primarilly a question of how the severance payment (and any future pension lumpsum) is taxed then perhaps it might get a better answer in the taxation forum. (Search the taxation fourm for information relating to tax treatment of severance lumpsums)

Incidently in CC's formula above

A=Average annual emoluments including BIK for the last three years of service prior to departure.

B=Number of completed years actual service

C=Any tax free gratuity received or receivable (i.e. discounted value of deferred gratuity) payable under the pension scheme.

This is called the Standard Capital Superannuation Benefit (SCSA) formula.

aj

SCSB
Reduncancy and Tax
Tax and Redundancy
Using personal tax credits
 
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