Tax implications on severance

[Dickerty]

Hi all.

I am looking at taking voluntary redundancy after 13 years in a company. I have gotten any package since about 2 grand back in about 2000. Can you help me understand the tax impact on a payment of about 100k? Assuming I don’t want a lump sum from my pension, will just transfer that to whatever new company’s plan.

Thanks!

 

[Joe_90]

There are a number of exemptions:
1. Statutory 2 weeks (max. €600 pw) for each year plus one week.

2. Basic, increased and SCSB exemptions.
The SCSB is average salary over 3 years x year service/15 - NPV of Pension Lump sum (at retirement)

So the key is the NPV of the pension lump sum.

E.g. Annual salary €60k
So statutory €600 x 27 = €16,200
€60k x 13/15 - 30k (Est.) = €22,00

 

[Dickerty]

Thanks! So I think I am getting 6 weeks per year, average salary is 85k basic, 100k OTE...

 

[Dickerty]

And assuming I don’t want a lump sum from the pension, does that help on the tax?

 

[Joe_90]

Well the SCSB would be €85k x 13/15 = €73,666 exempt.

Be careful about waiving the pension lump sum. It's the NPV of the lump sum so you could be sacrificing a large payment in the future for a small benefit now.

 

[Dickerty]

Thanks Joe, will see what they present!