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Lump sum payments

  1. Overview
  2. Basic exemption
  3. Increased exemption
  4. Standard Capital Superannuation Benefit (SCSB)
  5. Compensation for a change in working practices
  6. Other tax-exempt termination payments

Increased exemption

You may be entitled to an increase of €10,000 on the basic exemption if:

  • you have not received an amount in excess of the basic exemption in the previous ten years
  • and
  • you are not a member of an occupational pension scheme
  • or
  • you are a member of an occupational pension scheme, but give up your right to receive a tax-free lump sum from that scheme.

You may be due to receive a tax-free lump sum from your pension scheme. If so, the lump sum will be deducted from the additional €10,000 unless you waive your right to receive it. If the tax-free lump sum payment is not due yet, then the current value of it will be deducted from the €10,000.

If the tax-free lump sum from your pension scheme is more than €10,000, you will not qualify for the increased exemption. If it is less than €10,000, you will qualify for the increased exemption minus the lump sum amount.

You may have agreed with your pension provider that you will never receive a lump sum payment. You must inform your employer of this agreement in order to receive the increased exemption.

The increased exemption may only be granted once in a ten-year period. You do not need Revenue approval before availing of the increase in the basic exemption.

  • Example

    Tom was working for his employer for 35 years and received a lump sum payment of €200,000 from his employer on retirement.  He never received a tax-free termination payment before. He has received a tax-free lump sum of €5,000 from his pension scheme.

    Tom’s total basic exemption is as follows:
    Standard Basic Exemption (€10,160 + [€765 x 35]) €36,935 
    Increase in Basic Exemption (€10,000 - €5,000)  €5,000
     Total    €41,935

    Tom can receive up to €41,935 from his employer tax-free.

    If the tax-free amount Tom received from his pension scheme was €12,000, the increase in the basic exemption would not be available.

Next: Standard Capital Superannuation Benefit (SCSB)

Published: 24 July 2023 Print this page

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