What are effects of Redundancy lump sum on Tax free lump sum from DB Pension scheme

[rheinie]

We have a Redundancy situation at work .People are been offered Voluntary Redundancy.Company will not offer Deferred Pensions.I am 5 years short of NRAge.If I were to opt for this Redundancy what would be the effects of this Lump sum on the Tax Free Lump sum from a Defined Benefit Pension scheme in 5 years time.I have 41 years service so have max 40/60th of final salary.

 

[Homer]

Re: What are effects of Redundancy lump sum on Tax free lump sum from DB Pension sche

Hi Rheinie

Details of how severance payments are taxed and how they interact with pension lump sums are set out in the following Revenue leaflet:

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In general, the amount of severance payment you receive will not have any impact on the lump sum you can receive from your pension scheme, unless you decide to waive your entitlement to a pension lump sum in order to pay less tax on your severance payment (and the rules of your pension scheme permit such a waiver).

Whether or not this would be worthwhile will depend on your individual circumstances and you should seek advice from a tax expert. In redundancy situations, companies will often pay for the provision of this advice and you should ask your employer whether such advice is available to you.

Regards
Homer