maximizing tax relief on pension / redundancy

thenudeone

PaulCooper wrote: »

Just going back to basics for a minute

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shouldn't you ask your employer if they can pay the redundancy lump sum either side of the tax year, if they were happy to do that

I don't think the date of payment matters. It's probably the date of employment ceasing which triggers the tax liability, regardless of when payment is made. However, if the employer is giving over and above the statutory redundancy, and the extra isn't contractual, there's nothing wrong in exchanging some for a bonus paid in a different tax year.

bio

I did ask my employer if they can pay any of my redundancy package either side of the tax year especially as I am in effect being paid until the end of June. The answer was no, tax is applied when the redundancy package is paid. All that I can do is still contribute to my FS pension through to June.

So my plan is to
1) pay the whole of the taxable part of my redundancy package into my company pension as AVCs.
2) if later I need cash, transfer the AVCs into a (low cost) SIPP and 'retire' taking 25% cash (this would leave my company FS pension unaffected ie will start when I get to normal retirement age) and choose whether to draw no income or maximum (GAD) income or inbetween (HL have an online calculator /pensions/income-drawdown/income-drawdown-calculator that shows after 25% cash I could receive approx £1500 per year.)

I did wonder at how long the time period is from deciding I need 25% cash to having it appear in my bank account? I phoned HL and was told 4 to 6 weeks to transfer the AVCs from my company pension and set up a SIPP and then - providing they have the appropriate forms - the 25% cash payment could be made the following day. So I suppose 6 to 10 weeks is a safe bet which I am happy with.