Possible redundancy lump sum to pension?

philng

There is a possibility of redundancy in the next tax year and I am aware I can pay some of any excess over the 30k tax free amount in to my pension as a lump sum.

Is this restricted totally to the amount of my earnings in the tax year up to receipt of redundancy?

Example redundancy payment 80k earnings to say point of receipt 30k am I only able to place the 30k in to my pension in order to receive tax relief or can I pay the 50k and use up previous non used allowance?

Sure I had read there was a cap at 40k but only earnings for that year count?

If this is the case is there no way of avoiding paying tax on the additional 20k?

I have no urgency for the funds straight away.

xylophone

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM05203020.htm

http://www.pensionsadvisoryservice.org.uk/about-pensions/when-things-change/redundancy-and-your-pension

http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0336

philng

Still unsure how much I can pay in?

Redundancy likely to be in order of £87000 around July time-Can I only use earnings in the new tax year to date of leaving as a figure I can pay in to Pension to receive tax reief thus reducing tax paid on the lump sum?

jem16

philng wrote: »

Still unsure how much I can pay in?

Redundancy likely to be in order of £87000 around July time-Can I only use earnings in the new tax year to date of leaving as a figure I can pay in to Pension to receive tax reief thus reducing tax paid on the lump sum?

Tax relief is only available on 100% of earnings in the tax year in which you make the contribution.

Carry forward allows you to exceed the Annual Allowance of £40k but not the 100% of relevant earnings.

jamesd

You can ask your employer to make the extra redundancy payment into your pension. This is not subject to your earned income limit but is subject to the £40,000 a year limit, plus carry forward of the unused part of the previous three tax years, if you were a member of any pension scheme during those years.

kangoora

It's possible to salary sacrifice down to minimum wage and put the rest of your wage into a pension as an employer contribution - was wondering if this could also apply to redundancy payment.

Can an employer pay redundancy amounts >£30k in a similar arrangement to salary sacrifice?

kidmugsy

philng wrote: »

?

Example redundancy payment 80k earnings to say point of receipt 30k am I only able to place the 30k in to my pension in order to receive tax relief or can I pay the 50k and use up previous non used allowance?

You will have received £110k of which £30k is (I assume) the usual tax-free element of the redundancy money. So you could contribute (£110k - £30k) = £80k, if you carry forward unused annual allowance.

Mirador

If you do this, do you get tax relief on the whole amount paid in or is tax relief limited to the first £40k? Does anyone know?