If you have recently been offered or considering applying for a redundancy Package from your employer, It is very important to educate and clearly understand all of the options available to you. The options that you choose can have a significant impact on the Tax Free Lump sums that you qualify for from both your **Redundancy package** and your **Pension entitlements** (if applicable). In most circumstances, a redundancy package is offered to employees who have accumulated many years of service with their employer. **Redundancy packages **needs to be examined on an individual basis each package can be calculated differently.

If you have recently been offered or considering applying for a redundancy Package from your employer, It is very important to educate and clearly understand all of the options available to you. The options that you choose can have a significant impact on the Tax Free Lump sums that you qualify for from both your **Redundancy package** and your **Pension entitlements** (if applicable). In most circumstances, a redundancy package is offered to employees who have accumulated many years of service with their employer. **Redundancy packages **needs to be examined on an individual basis each package can be calculated differently.

Redundancy Packages are predominantly made up of the following.

** A Statutory Redundancy Entitlement**

** Ex Gratia Payment**

- This is a minimum compulsory entitlement under revenue rules that a company is obliged to offer its staff.
- All these funds are received by the employee tax-free.
- This figure is calculated as follows.

â€˜**2 weeksâ€™ pay for each complete yearsâ€™ service plus 1 weeksâ€™pay (maximum allowed weekly wage is â‚¬600)â€™**

Any additional funds remaining from the Redundancy Lump Sum, over and above the Statutory Entitlement is called an Ex-Gratia Payment.

- This is an optional extra sum of money over and above the Statutory Entitlement that the company offers as a goodwill gesture to qualifying employees for their years of service with the company.

- There is a tax-free portion with this payment option any balance taxable at the employeesâ€™ marginal rate of tax.

Redundancy Packages are predominantly made up of the following.

** A Statutory Redundancy Entitlement.ï»¿**

** Ex Gratia Payment**

- This is a minimum compulsory entitlement under revenue rules that a company is obliged to offer its staff.
- All these funds are received by the employee tax-free.
- This figure is calculated as follows.

â€˜**2 weeksâ€™ pay for each complete yearsâ€™ service plus 1 weeksâ€™pay (maximum allowed weekly wage is â‚¬600)â€™**

Any additional funds remaining from the Redundancy Lump Sum, over and above the Statutory Entitlement is called an Ex-Gratia Payment.

- This is an optional extra sum of money over and above the Statutory Entitlement that the company offers as a goodwill gesture to qualifying employees for their years of service with the company.
- There is a tax-free portion with this payment option any balance taxable at the employeesâ€™ marginal rate of tax.

- The Tax-Free Portion is calculated as follows.

**â€˜â‚¬10,160 plus â‚¬765 for each completed year of service**â€™

- The remaining funds left over are taxable.

- The Tax-Free Portion is calculated as follows.

**â€˜â‚¬10,160 plus â‚¬765 for each completed year of service plus â‚¬10,000 minus any tax-free lump sum entitlement from the employeesâ€™ pension****â€™.**

- The remaining funds left over are taxable
- With this option, you waive any right for a Pension Tax Free Lump Sum (if any) in lieu of an increased Redundancy lump sum.

- The Tax-Free portion is calculated as follows:

** Average earnings over the last 36 months multiplied by complete years of service and answer divided by 15â€™.**

- The remaining funds left over are taxable
- There is an option here to waive any Pension Tax-Free Lump Sum in lieu of an increased Redundancy lump sum.. This calculation is as follows.

(The same calculation as above) â€“ (Pension Tax-Free Lump Sum Entitlement) *****

* Please note you have a lifetime limit of â‚¬200,000 that can be received tax-free for redundancy payments *

* throughout your career.*

* You also have a lifetime limit of â‚¬200000 that can be received tax-free for all pension funds on retirement.*

**The pension Lump Sum figure is the lessor: **of 25% of the Pension fund value or (The Average Salary multiplied by Years of

service Multiply by 3/80ths)

- The Tax-Free Portion is calculated as follows.

**â€˜â‚¬10,160 plus â‚¬765 for each completed year of serviceâ€™**

- The remaining funds left over are taxable.

- The Tax-Free Portion is calculated as follows.

**â€˜â‚¬10,160 plus â‚¬765 for each completed year of service plus â‚¬10,000 minus any tax-free lump sum entitlement from the employeesâ€™ pension****â€™.**

- The remaining funds left over are taxable
- With this option, you waive any right for a Pension Tax Free Lump Sum (if any) in lieu of an increased Redundancy lump sum.

- The Tax-Free portion is calculated as follows:

**Average earnings over the last 36 months multiplied by complete years of service and answer divided by 15â€™.**

- The remaining funds left over are taxable
- There is an option here to waive any Pension Tax-Free Lump Sum in lieu of an increased Redundancy lump sum.. This calculation is as follows.

(The same calculation as above) â€“ (Pension Tax-Free Lump Sum Entitlement) *****

* Please note you have a lifetime limit of â‚¬200,000 that can be received tax-free for redundancy payments *

* throughout your career.*

* You also have a lifetime limit of â‚¬200000 that can be received tax-free for all pension funds on retirement.*

**The pension Lump Sum figure is the lessor: **of 25% of the Pension fund value or (The Average Salary multiplied by Years of

service Multiply by 3/80ths)

Below is a summary of the Ex-Gratia Payment calculation options and whether the Pension Tax-Free Lump sum is waived or not with each option.

Below is a summary of the Ex-Gratia Payment calculation options and whether the Pension Tax-Free Lump sum is waived or not with each option.

Many people make the make the mistake of choosing an Ex-Gratia payment option that waives their pension lump sum

entitlement in order to get an increased redundancy lump sum. However, in many circumstances, if the client is over 50,

they could get almost double the amount tax free entitlements from both sources (redundancy and pension) by choosing

another Ex Gratia payment option.

The pension transfer options differ greatly depending on whether your pension is defined benefit or defined contribution. Below is an illustration of the various options for each;

It is imperative to analyse what can be received tax free from both your redundancy package and your pension.

Many people make the make the mistake of choosing an Ex-Gratia payment option that waives their pension lump sum

entitlement in order to get an increased redundancy lump sum. However, in many circumstances, if the client is over 50,

they could get almost double the amount tax free from both sources (redundancy and pension) by choosing

another Ex Gratia payment option.

The pension transfer options differ greatly depending on whether your pension is defined benefit or defined contribution. Below is an illustration of the various options for each;

If an employee waives the right to a Pension Tax-Free Lump Sum, under revenues rules, the tax-free lump sum entitlements from this pension should be restricted forever. However, there are some grey areas with some options. Please see below:

If an individual, transfers his/her previous pension from into a new pension scheme, on retirement, he/she may access 25% of his total pension pot accumulated (previous pension funds plus new company pension funds) as a tax-free lump sum at his retirement age of 68, but this is unlikely to occur.

The New Employers Penson Schemes Application form usually always asks

If a previous pension is transferred into a PRSA. It may be possible to get 25% of this fund out from age 60 onwards, even if the individual chose an option with their redundancy to Waive the Pension Lump Sum.

Now, this is allowed but this could change in the future.

If an employee waives the right to a Pension Tax-Free Lump Sum, under revenues rules, the tax-free lump sum entitlements from this pension should be restricted forever. However, there are some grey areas with some options.

If an individual, transfers his/her previous pension from into a new pension scheme, on retirement, he/she may access 25% of his total pension pot accumulated (previous pension funds plus new company pension funds) as a tax-free lump sum at his retirement age of 68, but this is unlikely to occur.

The New Employers Penson Schemes Application form usually always asks

If a previous pension is transferred into a PRSA. It may be possible to get 25% of this fund out from age 60 onwards, even if the individual chose an option with their redundancy to Waive the Pension Lump Sum.

Now, this is allowed but this could change in the future.

Before making a final decision, all of the following options and calculations needs to be examined in detail;

- Basic Exemption
- Increased Exemption
- SCSB -retaining Pension Lump Sum
- SCSB - Waiving Pension Lump Sum

- Leaving it in old employers scheme
- Transferring to New Employers scheme
- Taking a Transfer Value from existing defined benefit scheme
- Transferring to a Personal Retirement Bond
- Transferring to a PRSA.

- Access to Personal Retirements can be gained from age 50 onwards,
- Access to P.RSAs e from 60 onwards
- Access to Occupational schemes Both DO and DC schemes are usually 65

Once all of these options are analysed, you will now be in a position to make an informed decision.

It is imperative to seek independent advice on all redundancies as due to the complexity of the calculations, many Companies offering these packages can get the calculations wrong. They also don't really analyse the impact your redundancy has on your pension entitlements.

Before making a final decision, all of the following options and calculations needs to be examined in detail;

- Basic Exemption
- Increased Exemption
- SCSB -retaining Pension Lump Sum
- SCSB - Waiving Pension Lump Sum

- Leaving it in old employers scheme
- Transferring to New Employers scheme
- Taking a Transfer Value from existing defined benefit scheme
- Transferring to a Personal Retirement Bond
- Transferring to a PRSA.

- Access to Personal Retirements can be gained from age 50 onwards
- Access to P.RSAs e from 60 onwards
- Access to Occupational schemes both DB and DC schemes are usually 65

Once all of these options are analysed, you will now be in a position to make an informed decision.

It is imperative to seek independent advice on all redundancies as due to the complexity of the calculations, many Companies offering these packages can get the calculations wrong. They also don't really analyse the impact your redundancy has on your pension entitlements.

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**Â© 2020 Money Maximiser** | Money Maximising Advisors Limited is regulated by the Central Bank of Ireland - C154250 | **Privacy Policy**