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REDUNDANCY & PENSION

SECURE YOUR FINANCIAL FUTURE

REDUNDANCY & PENSION GUIDANCE IN IRELAND

Facing Redundancy? Make Informed Financial Decisions

If you’re facing redundancy, understanding your financial entitlements is crucial. Your redundancy package can significantly impact your pension and future financial security. Our expert advisors help you navigate your options to maximise tax-free benefits and secure your long-term financial well-being.

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UNDERSTANDING YOUR REDUNDANCY ENTITLEMENTS

Your redundancy package typically includes

1) Statutory Redundancy Entitlement

  • A legally mandated payment that employers must provide.
  • Completely tax-free for employees.
  • Calculated as two weeks’ pay per completed year of service plus one additional week (capped at €600 per week).

2) Ex-Gratia Redundancy Payment

  • An additional, discretionary payment from your employer as a goodwill gesture.
  • A portion is tax-free, but the remaining balance is subject to tax at your marginal rate
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MAXIMISING YOUR TAX-FREE REDUNDANCY PAYMENT

There are three methods to calculate the tax-free portion of your Ex Gratia payment:

1) Basic Exemption

Tax-free amount: €10,160 + €765 for each completed year of service.

2) Increased Exemption (if applicable)

Tax-free amount: €10,160 + €765 per completed year of service + €10,000 (minus any previous redundancy or pension tax free lump sums received in past 10 years). Choosing this option means waiving your right to a tax-free pension
lump sum in the future.

3) Standard Capital Superannuation Benefit (SCSB)

Tax-free amount: (Average earnings over the last 36 months × years of service) ÷ 15.

This method can offer a higher tax-free sum, but you must decide whether to retain or waive your tax-free pension lump sum.

The SCSB calculation differs slightly if you waive or retain your pension lump sum. These calculations are

  • SCSB - waiving pension lump sum

(average earnings over past 36 months x years of service)

  • SCSB - retaining pension lump sum

(average earnings over past 36 months x years of service) 15 minus pension tax free lump sum

BELOW IS AN INFOGRAPHIC OF EX-GRATIA PAYMENT CALCULATION OPTIONS

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PENSION TRANSFER OPTIONS AFTER REDUNDANCY

Upon leaving employment, you have several pension transfer options. Each choice impacts your tax benefits and accessibility to funds.

Your Pension Transfer Choices

  • Leave it in your former employer’s scheme
  • Transfer it to a new employer’s scheme (if available)
  • Transfer it to a Personal Retirement Bond (PRB)
  • Transfer it to a Personal Retirement Savings Account (PRSA) (for tax-free lump sum retention)

Important Considerations

If you choose an increased tax-free redundancy payment by waiving your pension lump sum, you can only regain a tax-free lump sum if you transfer your pension into a PRSA. None of the other transfer options allow for a tax free pension lump sum.

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PRSA TRANSFERS: A TAX-EFFICIENT RETIREMENT STRATEGY

Transferring your pension into a PRSA ensures you retain your tax-free lump sum entitlement (25% of the transfer value).

Please see below a table that compares the benefits of each borrowing option for a buy-to-let mortgage.

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Accessing Your PRSA

  • Standard retirement age: 60
  • Early access: From age 50, provided you are fully retired (i.e., no PAYE
    employment income).
  • Planning to return to work? Retiring your PRSA before re employment ensures:
  • Immediate access to your tax-free lump sum
  • The remaining 75% can be transferred into an Approved Retirement Fund (ARF)
  • Flexibility to leave funds in the PRSA if immediate access isn’t required

PRSA TRANSFER REQUIREMENTS

INDEPENDENT REPORT NEEDED

Transferring from an occupational pension scheme (Defined Benefit or Defined Contribution) into a PRSA requires an Independent Statement of Comparison of Benefits Report. Only a limited number of authorised companies in Ireland provide this report to meet Revenue requirements.

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MAKE AN INFORMED DECISION

WITH EXPERT GUIDANCE

Choosing the right redundancy and pension transfer option is essential to protect your financial future. Many redundancy package calculations overlook long-term pension implications, leading to costly mistakes. Our expert financial advisors provide personalised guidance to help you:
  • Maximise tax-free redundancy payments
  • Optimise pension transfer strategies
  • Ensure compliance with Revenue regulations
  • Secure your long-term financial future
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