I agree re option 4.
With the increased basic exemption (option 2/3) - its only available every 10 years, so no point using that option up now, when given your long service, the SCSB gives you a much better tax free calculation.
Hi, I would like to ask a question in relation to above.
My wife is being made redundant. She has 14 years experience and will get an ex gratia payment of roughly 60,000.
Will the company offer the tax options above or does she need to figure out the best option and tell them to apply it?
Also what does exactly does pension waived/retained mean? She has a pension with her current employer - she doesn't know if it's setup to provide a lump sum payment in the future (she is in her mid 40s). I don't understand what you mean by 'actuarial PV of the lump sum' or the relevance.
These are the revenue options for redundancy - available to all.
Usually a company making redundancies will have a payroll or tax advisor to ensure they deduct the right tax, and there will be some paperwork for your wife to complete to see what options above to apply - whether she was made redundant & got a lump sum before, whether to waive the pension tax free lump sum (most if not all work pension schemes offer this) in the future. The most important document is the settlement agreement that she should get some independent legal advice on.
The table above is a good way to work out for herself what's the best option tax wise - once updated for her details & circumstance - the years of service, ex-gratia on offer etc. To understand the formulas behind each step - see citizens information or Revenue.ie .
The 'actuarial PV of the lump sum' is a calculation to discount the future value of a pension entitlement into today's money - for example she may be entitled to 34k lump sum @ age 65, with a value today of 12k [random figures to illustrate the point], so 12k would be deducted from the 'Total tax exemption' in options 2 & 4 above. This figure should be provider to her by the employer, and she shouldn't sign the pension waiver document until she gets this amount to see how it affects the overall picture.
Note that it is the PV of the lump sum as calculated under the scheme rules years of service basis.
It is not the PV of the 25% lump sum that may be available under the ARF option at retirement which is generally much higher than available under the scheme rules.
This is an important point and means that it is rare to fare better by waiving the lump sum.