Help me work out best way to take redundancy please?

[Lyndan]

Hey All,

I have read up on the revenue website etc. and I even spoke to someone from Department of Employement on the phone but I'd still rather ask the people on the forum for some help on this.

I have been made redundant after 6.5 years of service.

I am getting my 2 weeks statutory payment plus 5 weeks for each year of service.

My company has said I am recieving €33,195 (€8,388 stat & €24,807 additional)

I asked if they could give me my options for all the different tax reliefs and they said its worked out based on 'basic exemption' for other options I must seek independent financial advice...

I would have thought they might have helped me a bit more!!

Can anyone help me work out the other options available?

Cheers

 

[ClubMan]

I don't think that most companies will or possibly can (i.e. are authorised to) give tax advice. I guess some may engage tax consultants to help out in such circumstances. I think you need to get your own independent, professional advice. Obviously some people her may be able to give general tips.

 

[efm]

Lyndan - take a look at, among other things, the possibility of forgoing a lump sum payment from your pension fund at retirement and in return getting an additonal €10,000 tax free - ie meaning you would get €18,388 tax free and €14,807 taxed.

To be fair I have found the information on the revenue site pretty good for explaining the tax options around redundancy.

Also, the DETE have an excellent statutory redundancy calculator on line to help you make sure you are getting the correct amount.

 

[cormacol]

If you do waive your right to take some of your pension as a tax free lump sum at retirement then you will get all of your redundancy payment tax free

- stat redundancy is always tax free
- Your basic exemption is 10,160 +765*6
- As previous poster says - you can get an additional exemption of 10,000 if you aren't taking tax free cash.

However you need to get advise to ensure that you understand the implications of not taking tax free cash at retirement

 

[ClubMan]

If you do waive your right to take some of your pension as a tax free lump sum at retirement then you will get all of your redundancy payment tax free

You mean waive the right to any or all of the possible 25% tax free lump sum at retirement? Sounds like a potentially very drastic decision (and I realise that you recommnend considering this carefully and getting advice).

 

[efm]

You mean waive the right to any or all of the possible 25% tax free lump sum at retirement? Sounds like a potentially very drastic decision (and I realise that you recommnend considering this carefully and getting advice).

Yes it is and is probably not recommended for someone closer to retirement than not, but what one needs to do is a Net Present Value calc of the expected lump sum amount and compare to €10,000 today ie is it better to get €10,000 today or €25,000 in 15 years time -if you take expected inflation over 15 years into account you may be better off taking the money now.

Obviously it does depend on the status of one's pension post redundancy and what type of scheme it is/was, and any other expected pension amounts and values ie spouse or partner.

It is because of all these different variables that it is advised to get professional advice - and rightly so!

 

[Ollie11]

I was made redundant before Christmas with nearly 6.5 years of service. The company provided a spread sheet with all the different tax options and the net redundancy amount using each option. I was earning just under 40,000 a year and for me the best option was to take the increase tax allowance of 10,000 but still retain the right to my lump sum on retirement.You can avail of the increased exemption of 10,000 if you have not been made redundant in the last 10 years but you do not necessarily have to waive the right to a lump sum as well. My redundancy was approx 28,000 and I did not pay any tax on it which was nice!

 

[ClubMan]

There is also a loophole whereby additional tax free amounts over and above termination/redundancy amounts can be put into a PRSA (but not an occupational pension plan since these amounts would come off the total redundancy/termination amount). Some tax practitioners may not know about this and some that do are wary of drawing Revenue's attention to it!