Lump Sum & Tax

My mother has been offered a one-off payment of ~€9K as a pension lump instead of taking a minimal amount as a weekly pension when she reaches the age (she's currently 63). If she accepts the offer is she liable for tax on it?

She will be entitled to a tax free lump sum. Amount will depend on her term of service and salary. look up Citizens Advice website on pension lump sums or talk to an accountant!

Your mother has what is called a trivial pension. If the fund is below €20,000 (after the tax free lump sum is paid), the life company will pay out the full value of the pension instead of her getting a few hundred euro a year.

The tax paid on this is 10%.

The trivial pension she receives will be tax free if she has no other income but she needs to be alive for 22.5 year if she gets a rate of 4% per annum for her to get the full €9,000 paid out to her.


Steven
www.bluewaterfp.ie

Hi turty3

There are two types of trivial pension:

(i) the pension benefit is less than €330 p.a. (and not created as a result of commutation). In this scenario, the tax rate is 10%.

(ii) the circumstances described by SBarrett above. In this scenario, the lump sum is subject to tax and USC like any other income in the tax year. So, the tax and USC payable, if any, depends on your mother's income position generally.