Ex gratia pension payment

Malthusian

The think is, it puts nearly everyone in the super tax bracket.

An excellent reason to accept the company's offer to put it in the pension.

My thoughts were ex gratia is and should be tax free.

If you think it should be tax free it's a free country, but the tax rules are very clear that it isn't. Otherwise everyone would work as volunteers and their employers would pay them "ex gratia". The link you stumbled across is irrelevant as it's talking about redundancy payments.

Paul_Herring

An excellent reason to accept the company's offer to put it in the pension.

Or maybe look more closely at what they're actually giving up in return for accepting it...

davidwatts

Paul_Herring wrote: »

Or maybe look more closely at what they're actually giving up in return for accepting it...

Could just be me speaking from past experience but I suspect the only choice here is whether to take the "sweetener" as taxable income or add it to the pension. I very much doubt there is any choice about whether or not the DB scheme closes (opening post says the employer is closing it).

There tends to be very little negotiation on the subject of closing DB schemes!

Paul_Herring

Could just be me speaking from past experience but I suspect the only choice here is whether to take the "sweetener" as taxable income or add it to the pension.

I was rather more drawing from what xylophone quoted, specifically:

to transfer the value of their benefits in the DBS into either a DCS scheme or some other registered pension arrangement of the member's choice; or
to give up some right under the DBS whilst remaining a member of it – for instance, giving up the right to future increases in the rate of pension payable by the DBS,

I took it for granted that further contributions couldn't be made; it was what's happening with contributions already made I was thinking of.

Malthusian

Paul_Herring wrote: »

Or maybe look more closely at what they're actually giving up in return for accepting it...

Very true, but like Davidwatts I got the sense the closure of the scheme was a done deal. It doesn't sound like we're talking about the OP taking a CETV.

Ianboid

It is a done deal which is non negotiable.
But they are offering cash and as I intend finishing in 4 yrs at 55 it's not going to make a massive amount of difference to my pension pot.
So the cash will be accepted and give me a bit of smile money.
I have 4 pensions already frozen, this will be my 5th
3 with the same company.
But I'm sat on a nice pile for drawdown at 55

Ianboid

Quick update the revised pension offer has been accepted.
The sweetener offered by my company is £22,500.
My next question is super tax.
Will I be taxed at 40% immediately after I am paid that sum or will I be taxed at 40% when I pass £50k in a 12 month period ?
Massive thanks to all that have contributed to this thread.

Dazed_and_confused

Is it being paid with your normal weekly/monthly salary payment or as a separate payment?

Ianboid

It's being paid with our weekly salary

molerat

Yes you will pay some 40% tax but will get it back over the year. A large one off payment early in the year always attracts a large tax deduction but the PAYE system ensures you only pay the correct amount of tax over the year.