A family member has recently looked into a Voluntary Parting Package at work and has a big decision to make. The decision is mostly around future job security in the field, currently limited promotional prospects and current age. They are at an age where changing career is not impossible, though will require an open mind and some work, possibly up-skilling. They are unsure of the impact of some decisions now required if package is to be formally offered. The basic details are:
24 years service
17 years to retirement age
The main area of confusion is surrounding the decision below:
O p t i o n A – You retain your right to a tax-free lump sum from the Pension Plan when you retire.
O p t i o n B – You waive your right to a tax-free lump sum from the Pension Plan when you retire.
What is the benefit, if any, of waiving the right to a tax free lump sum on retirement when applying for a redundancy package? The tax application of Option B results in less than €2K increase in the redundancy payment.
If you waive the right to a lump sum at retirement does that mean the pension pot remains at a higher value to allow for higher monthly pension payments, which I understand are taxable?
Also, if they take the package are they entitled to any Social Protection payments?
We are all very inexperienced in this area and most family members are PAYE workers, both private and public sector, and have paid into work pensions from a young age without having much knowledge around the implications of the above and leaving a plan early.
Any advice on the implications of the above two options would be much appreciated.
24 years service
17 years to retirement age
The main area of confusion is surrounding the decision below:
O p t i o n A – You retain your right to a tax-free lump sum from the Pension Plan when you retire.
O p t i o n B – You waive your right to a tax-free lump sum from the Pension Plan when you retire.
What is the benefit, if any, of waiving the right to a tax free lump sum on retirement when applying for a redundancy package? The tax application of Option B results in less than €2K increase in the redundancy payment.
If you waive the right to a lump sum at retirement does that mean the pension pot remains at a higher value to allow for higher monthly pension payments, which I understand are taxable?
Also, if they take the package are they entitled to any Social Protection payments?
We are all very inexperienced in this area and most family members are PAYE workers, both private and public sector, and have paid into work pensions from a young age without having much knowledge around the implications of the above and leaving a plan early.
Any advice on the implications of the above two options would be much appreciated.
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