MAXIMISING YOUR PAYOUT & PENSION OPTIONS
REDUNDANCY can be a challenging and uncertain experience, whether voluntary or compulsory. However, understanding your financial options can help you make informed decisions to protect your future. Knowing what you are entitled to and how best to manage your redundancy payments can make a significant difference in your financial security.
WHAT ARE YOUR REDUNDANCY ENTITLEMENTS? If you are made redundant, you may be entitled to several financial benefits, including:
• Statutory Redundancy Pay – This is the legally mandated minimum payment, calculated based on your length of service, age, and weekly earnings. In Ireland, this amount is tax-free up to a certain limit.
• Ex-Gratia Payment – Some employers offer additional, discretionary lump-sum payments beyond statutory redundancy, though these may be subject to tax.
• Notice Pay – If you are not required to work your notice period, you may receive payment in lieu of notice (PILON).
• Unused Holiday Pay – Employers must compensate you for any accrued but unused annual leave.
• Pension Considerations – Depending on the type of pension scheme you were part of you may have the option to leave your pension in place, transfer it to another scheme, or take benefits if eligible.
• Retraining or Outplacement Support – Some employers provide career transition services, retraining opportunities, or job search assistance.
KEY FINANCIAL CONSIDERATIONS – Redundancy payments come with important financial decisions. Proper planning can help you maximise your payout and avoid unnecessary tax liabilities.
• Taxation of Redundancy Payments – Statutory redundancy pay is tax-free up to €200,000 in Ireland, but ex-gratia payments may be taxable. You may be eligible for tax reliefs such as the Basic Exemption or
the Increased Exemption, reducing your overall tax burden.
• Pension Options – If you were part of a company pension scheme, you need to decide whether to leave it in place, transfer it into a Personal Retirement Bond (Buy Out Bond), or consider early retirement options.
• Investing or Saving – If you do not need immediate access to your redundancy payment, you may benefit from investing it in a tax efficient savings plan or contributing to a pension to enhance your retirement savings.
• Managing Debt – If you have outstanding loans or a mortgage, using part of your redundancy payment to reduce debt may provide greater financial stability, particularly if job prospects are uncertain.
THE IMPORTANCE OF FINANCIAL ADVICE – Understanding the financial implications of redundancy can be complex. A qualified financial adviser can help you:
• Navigate tax liabilities and reliefs to ensure you keep as much of your payment as possible.
• Assess your pension options and make informed decisions about transfers or consolidations.
• Develop a financial strategy to manage your redundancy payment effectively, whether through investment, savings, or debt management.
• Plan for your next steps, whether re-entering employment, retraining, or transitioning into retirement.
Take Control of Your Old Pension either as a result of redundancy or moving jobs – The Benefits of a Buy Out Bond. If you have changed jobs over the years, you may have one or more workplace pensions sitting with former employers. Many people assume these pensions will take care of themselves, but this is not always the best approach. A Buy Out Bond (also known as a Personal Retirement Bond) allows you to take
control of your pension savings and invest them in a way that suits your financial goals.
WHAT IS A BUY OUT BOND? A Buy Out Bond is a personal pension account that holds funds transferred from a company pension scheme after you leave an employer. Instead of keeping your pension with your former employer’s scheme, you move it into a bond held in your own name. This ensures that your retirement savings remain secure and invested until you reach retirement age.
WHY CONSIDER A BUY OUT BOND? A Buy Out Bond offers several advantages, making it an attractive option for those who have left a workplace pension scheme:
1. Full Ownership and Control – Your pension savings are held in your name, meaning you are no longer tied to a former employer’s pension scheme or subject to their decisions.
2. Investment Flexibility – Many workplace pension schemes offer limited investment choices. A Buy Out Bond allows you to select investment options that align with your risk appetite and retirement objectives.
3. Transparent Charges – With a Buy Out Bond, you have a clearer understanding of fees and charges, ensuring better value compared to some company pension schemes.
4. Easier Access at Retirement – Some workplace pensions have restrictions on when and how you can access your funds. A Buy Out Bond simplifies this
process, allowing you to access your money in a tax efficient manner when you retire.
5. Security Against Employer Pension Scheme Changes – If your former employer’s pension scheme is wound up or experiences financial difficulties, your retirement savings could be at risk. A Buy Out Bond safeguards your pension, regardless of what happens to your previous employer.
WHO SHOULD CONSIDER A BUY OUT BOND? If you have ever contributed to a workplace pension and subsequently left that employment, it is worth reviewing your options. Your pension savings could be working harder for you in a Buy Out Bond rather than sitting in an old employer’s scheme where you have no control over investment decisions.
HOW TO GET STARTED – Transferring your pension into a Buy Out Bond is a straightforward process, but professional guidance ensures you make the right choices. A financial adviser can help you:
• Review your existing pension benefits.
• Compare investment options to find a strategy that aligns with your retirement goals.
• Manage the transfer process efficiently, ensuring compliance with pension regulations.
TAKE CHARGE OF YOUR RETIREMENT SAVINGS – Your pension is one of your most valuable financial assets, and ensuring it is optimally managed is crucial for a secure retirement. If you have old pensions from previous jobs, now is the time to take control. For expert advice on pensions, pre and post-retirement and Buy Out Bonds, contact Moore Financial Consultants today. Our team specialises in pension planning and can help you make the most of your retirement savings.