Being made redundant is one of the most financially and emotionally significant events in a person’s life. Whether you’ve seen it coming for months or it arrived without warning, the decisions you make in the weeks and months following redundancy will have a lasting impact on your financial wellbeing.
At Money Sense Financial Services in Killarney, Co. Kerry, we specialise in helping people navigate the financial complexity of redundancy , from understanding your entitlements to making the smartest possible use of your lump sum and pension options. This guide will walk you through everything you need to know.
| Just been made redundant? Don’t make any financial decisions before speaking to an advisor. |
Understanding Your Redundancy Entitlements in Ireland
Before you do anything with your money, it’s critical to understand exactly what you’re entitled to. Irish employment law provides several layers of financial support for those who have been genuinely made redundant.
Statutory Redundancy Payment
Under Irish law, if you’ve been in continuous employment for at least 2 years, you’re entitled to statutory redundancy pay. This is calculated as 2 weeks’ gross pay per year of service, plus 1 additional week , capped at €600 per week. This payment is entirely tax-free.
Ex-Gratia Payments
Many employers offer a more generous redundancy package than the statutory minimum. These ex-gratia payments may be partially or fully tax-free depending on the amount and your length of service. There are specific Revenue exemptions , the Basic Exemption, the Increased Exemption, and the Standard Capital Superannuation Benefit (SCSB) , and it’s vital to have an advisor calculate which maximises your tax-free amount.
What Happens to Your Pension?
If you were a member of your employer’s pension scheme, you’ll receive ‘Leaving Service Options’ documentation detailing what you can do with your accrued pension benefits. Our previous pension advice service helps you understand these options in plain English and choose the path that’s right for you.
Tax Planning After Redundancy: Maximising What You Keep
The tax treatment of a redundancy payment in Ireland can be complex, and the difference between a well-advised and a poorly-advised outcome can be substantial. There are three key tax exemptions worth understanding:
- Basic Exemption: The first €10,160 of any ex-gratia redundancy payment is tax-free, plus €765 for every complete year of service
- Increased Exemption: A further €10,000 may be exempt if you haven’t received certain other tax-free payments in the previous 10 years
- SCSB (Standard Capital Superannuation Benefit): Often the most generous option for longer-serving, higher-earning employees , calculated as 1/15th of average annual earnings over the last 3 years, multiplied by years of service, minus any tax-free lump sum from the pension scheme
Getting this calculation right could mean the difference between paying tax on €30,000 or €0. Our advisors will analyse your specific situation and identify the most beneficial exemption for you.
| Want to know how much of your redundancy payment is tax-free? We’ll calculate it for you. |
What Should You Do With Your Redundancy Lump Sum?
Receiving a lump sum can feel liberating, but it also comes with pressure. Here are the most important financial priorities to consider in order:
1. Build Your Emergency Fund First
Before investing a single euro, make sure you have 3-6 months of living expenses set aside in a liquid, accessible account. If you’re not sure how long it might take to find new employment, err on the side of caution and aim for 6 months.
2. Clear High-Interest Debt
If you have credit card debt, personal loans, or other high-interest obligations, paying these off is often the best guaranteed return you can make. Eliminating a 15% APR credit card is equivalent to earning a 15% investment return , tax-free.
3. Consider Your Mortgage
If you have a mortgage, your redundancy may affect your ability to keep up repayments. It may also present an opportunity to make an overpayment, depending on your circumstances. Our mortgage comparison and advice team can help you assess your options.
4. Invest Wisely for the Long Term
Once your short-term financial security is addressed, any surplus lump sum is an opportunity to build long-term wealth. Options include contributing to a pension (PRSA or personal pension), investing in a medium-to-long term investment account, or a combination of both.
5. Review Your Protection
When you leave an employer, you typically lose any group life assurance or income protection that was provided as part of your employment package. Now is the time to review your personal protection advice needs and ensure your family is covered.
Redundancy and Your Pension Options
When you leave employment, your pension situation needs immediate attention. The options available to you typically include:
- Deferred Benefit: Leave the pension in the employer’s scheme as a ‘frozen’ benefit until retirement age
- Personal Retirement Bond (PRB/Buy-Out Bond): Transfer your benefits into an individual policy in your name
- Transfer to a New Employer’s Scheme: If you move to another job with a pension scheme, you may be able to transfer
- Transfer to a PRSA: If eligible, transferring to a Personal Retirement Savings Account gives you greater flexibility
Each of these options has different implications for investment control, costs, access age, and tax treatment. Making the wrong choice now could negatively affect your retirement outcome by years. Our specialists will guide you through every option with complete transparency.
Redundancy at 50+: Special Considerations
If you’re over 50 and facing redundancy, your options and priorities will be different from those of a younger worker. Depending on the terms of your pension scheme, you may be close to , or even eligible for , early retirement. In some cases, this can be a genuine opportunity to step away from the workforce on your own terms.
Our retirement planning advice service is specifically designed for clients in this situation. We’ll help you model different retirement scenarios, understand your pension access options, and create a financial plan that gives you security and confidence in the years ahead.
| Over 50 and facing redundancy? Let us help you plan a confident next chapter. |
Why Choose Money Sense Financial Services for Redundancy Advice?
Redundancy advice is one of the most time-sensitive areas of financial planning. Revenue deadlines, pension transfer windows, and the pressure of your income stopping means you need clear, expert guidance quickly , from advisors you can trust.
- Independent, regulated financial advisors based in Killarney, Co. Kerry
- Deep expertise in Irish redundancy tax legislation and Revenue exemptions
- Whole-of-market pension analysis , we compare every option available to you
- Family-run practice with 17,000+ satisfied clients and a reputation for honest advice
- Flexible appointment times, including remote consultations
Frequently Asked Questions
1. Is a statutory redundancy payment taxable in Ireland?
No. Statutory redundancy payments are fully exempt from income tax in Ireland. However, ex-gratia payments over and above the statutory amount may be partially taxable, depending on the amount and how long you’ve worked for the employer.
2. Can I contribute my redundancy lump sum to a pension?
Yes, in many cases you can make contributions to a personal pension or PRSA using your redundancy lump sum, potentially receiving tax relief at your marginal rate. An advisor will calculate whether this is beneficial in your specific situation.
3. How long do I have to decide what to do with my pension after redundancy?
While there is no strict legal deadline for making a decision about your pension, it’s important to act promptly. Leaving service options documents typically have a response window, and delaying your decision can have cost and performance implications.
4. Will I lose my pension if the company I worked for goes into liquidation?
Occupational pension funds are legally separate from the employer and are generally protected in the event of company insolvency. However, defined benefit schemes can be more complex , contact our office immediately if this is your situation.
5. What is the Basic Exemption for redundancy tax in Ireland?
The Basic Exemption allows the first €10,160 of an ex-gratia redundancy payment to be received tax-free, plus €765 for each complete year of service. This exemption is available to all qualifying employees regardless of their income.
Don’t Navigate Redundancy Alone
Redundancy is challenging, but it doesn’t have to be financially damaging. With the right advice at the right time, it can be the beginning of a more intentional, financially secure future.
Money Sense Financial Services is here to help you make smart decisions under pressure. Contact us today for a free, confidential consultation with one of our expert advisors.
| Money Sense Financial Services | Killarney, Kerry | Regulated by the Central Bank of Ireland |
