Guidance Needed on Pension Decision Post-Redundancy

Hello! my daughter has recently been made redundant, and as part of the severance package, she needs to make a decision regarding her pension benefits. Specifically, she must choose between two options. Lets assume those are the options:

1. Receiving a tax relief today of approximately €4,000, in exchange for waiving her entitlement to 25% of her pension pot as a tax-free lump sum at retirement (up to €200,000), or
2. Paying slightly more tax now (around €4,000), in order to retain the full tax-free lump sum benefit on retirement.

Assuming she will have approximately €400,000 in her pension at retirement, this 25% tax-free lump sum could amount to €100,000.

The challenge is that she does not plan to retire in Ireland, but perhaps somewhere in Europe, perhaps lower tax country. The advisor mentioned that if she retires abroad, she may be taxed on that lump sum in the country she chooses to retire in.

Given this, I’m trying to understand whether it is generally more beneficial to:

• Waive the future lump sum for a modest tax benefit today (4K) in comparison to a larger sum in the future (100K), or
• Retain the lump sum benefit, even if it may be taxed later abroad.

Would most countries typically tax this pension lump sum? And even if they do, would she still likely be better off keeping the lump sum entitlement rather than accepting the relatively small tax relief now?

Any insights or advice you can share would be greatly appreciated.

RAY12345 said:

Specifically, she must choose between two options. Lets assume those are the options:

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Assume nothing . She has 3 options and there are a lot of things to consider like, what age is she, what year will she retire, how long has she been in the current company, how much is in the current pension fund.

If she's a higher earner has she looked into Standard Capital Superannuation Benefit? This may end up allowing for much more tax free.

Companies are meant to offer the most tax efficient options but in my experience of a small company, SCSB was not put on the table until I raised it. It improved my payout and doesn't effect pension drawdown.