Redundancy and your pension
If you are made redundant, you will have important decisions to make. Some of these may relate to your pension.
If you’re made redundant, your immediate concern will probably be finding a new job – and you may receive a redundancy payment to help you cope financially until you do. You will also be free to transfer your pension and, if you feel able to, you will also be able to use any redundancy payment to make additional pension contributions.
From a pensions point of view, redundancy gives you several choices. You can keep your pension benefits where they are, and even continue contributing to the workplace scheme. Or, you can transfer what you’ve saved to a new pension scheme.
You can also use part of your taxable redundancy payment, to make pension contributions. Or, if your employer agrees, you could give up some of your redundancy payment as an employer contribution to your pension. This is known as a ‘redundancy sacrifice’.
If you decide to make additional payments into your pension, just be careful that if you do arrange additional contributions, you don’t exceed the annual allowance, as payments above this are subject to tax.
Will taking a tax free lump sum from my pension on retirement effect my tax free redundancy settlement?
No. If you have been offered a tax-free cash sum on retirement from your workplace scheme, this will have no bearing on your redundancy settlement. Both may be completely tax-free.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.