PILON & pension payments

floofydawg

I’m leaving my employer of 20+ years under a settlement agreement. I’m getting 12 weeks PILON which is obviously taxable, as well as my settlement which is tax free up to £30k. I’ve asked my employer if I can pay some of the PILON into my pension and they’ve said they don’t offer this option. My question is, can they point blank refuse? Feel like I should have the option. I’m 55 in case that matters, so could start drawing down my pension.

Brie

Look at how the pension receives lump sum payments. Tell the pension admins that you want to pay £XXXX from whatever month the last salary is being paid on the assumption you will have the PILON at that point and see what they say.  Your employer might think the answer is no because they don't actually know.

Alternative is to pay it into a SIPP or similar I suppose.

chrisbur

Your employer may be avoiding this as tax on PILON can get complicated; some info here....

https://www.shoosmiths.com/insights/articles/common-pitfalls-employers-face-when-calculating-post-employment-notice-pay

I have no idea if this would apply to you or not, possibly your employer is in the same position.  The last paragraph from this....

"PENP calculations are fraught with difficulties. What is clear is that careful consideration of the amounts being paid and their treatment for tax purposes is needed, and this may require legal advice and/or HMRC clearance."

TheSpectator

Whether you feel like you should have the option is irrelevant and yes, they can point blank refuse.

Hoenir

Nothing to stop subsequently contributing to a pension plan to obtain the tax relief.