Basic exemption | 20,870 | ||
Increased exemption | 30,870 | ||
SCSB | 41,907 | 134,700 | |
Statutory Redundancy | 18,132 | ||
Stat plus Basic | Stat plus Increased | Stat plus SCSB | |
Tax Exemption | 39,002 | 49,002 | 60,039 |
Gross Lump Sum minus Tax Exemption = Taxable amount | 35,101 | 25,101 | 14,064 |
Tax at 40% + USC at 8% | 16,848 | 12,048 | 6,751 |
Net Lump Sum - Waive Right | 57,254 | 62,054 | 67,352 |
A family member has been offered a voluntary severance package. He is single, mid forties, 14.61 years of service and is on a salary of €43,000. To be honest we don't understand the forms and what his best option is - should he sign the Tax/Pension Retain Form or sign the Waiver Form? If he signs the Tax/Pension Waiver Form it seems that he has to then choose either the Increased Exemption or SCSB formula and to decide to waive any right he may have to a tax free lump sum from his deferred pension. We have no idea what is the best thing for him to do. He intends to look for another job after a break of a month and has sufficient savings to get by for a while.
The VS Calculation is €74,103 and then see below..
Basic exemption 20,870 Increased exemption 30,870 SCSB 41,907 134,700 Statutory Redundancy 18,132 Stat plus Basic Stat plus Increased Stat plus SCSB Tax Exemption 39,002 49,002 60,039 Gross Lump Sum minus Tax Exemption = Taxable amount 35,101 25,101 14,064 Tax at 40% + USC at 8% 16,848 12,048 6,751 Net Lump Sum - Waive Right 57,254 62,054 67,352
Any advice would be much appreciated.
I believe this is correct. I, too, was confused with the wording. Many moons ago when I was made redundant I took the default basic exemption (which was 10k at the time I think) but I rang revenue asking was I due anything as I got another job a while later. They told me that the scsb would be more benificial and to put in a request for a refund at the end of the year as they had to wait till then. I got a couple of grand back as I managed to get someone to do the maths in revenue for me. I'm not sure you'd be as lucky with getting revenue to do the heavy lifting but my point is that you will probably have to wait till the end of the year to see the scsb figures and your tax paid for the year anyway.you mean that if he signs the tax/pension waiver now he will get a larger sum today but he loses in the long-term, as the value of the tax free lump sum from his pension will continue to increase in value and be worth much more ultimately.
The general rule is you should never sign the Waiver form without very good reason and you should get advice before you do. Whether you sign the waiver or not has nothing to do with whether he chooses the Increased Exemption or the SCSB. Pick whatever is financially better off for you.
The 'loophole' mentioned above works but I had huge hassle trying to use it with my last pension provider when I was made redundant. They don't like it.
From a redundancy payment point of view, you will always be better off now by signing the waiver because you if don't sign the waiver, they reduce the SCSB amount by the present value of the tax free element of the expected tax free pension lump sum. There are a couple of circumstances where signing the waiver makes sense but generally, you should never give up your right to receive the tax free lump sum from your pension. For the sake of a few thousand extra today, you could end up waiving the right to a lot more in the future.
There is no impact on other pensions and tax free entitlements from them. The waiver only applies to the affected occupational pension. Even if you sign the waiver and then consolidate it with other pensions, the pension providers will ring fence the portion of the pension that the waiver applies to.
I would use the SCSB option and do not agree to waive your rights on the pension. But again, that's just my opinion...
He also needs advice on what to do with the money. I understand that you can't name financial advisors on the forum but if someone would pm me one or two people that they could recommend, I would really appreciate it.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?