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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

Standard Capital Superannuation Benefit (SCSB)

SCSB is an additional relief you may be entitled to. It typically benefits employees with high earnings and long service.

SCSB is calculated at 1/15 of your average annual pay for your last 36 months in employment. This is then multiplied by the number of full years you were working for your employer. Any tax-free lump sum payments you have received, or are entitled to receive, from your work pension are subtracted from this benefit.

Temporary Wage Subsidy Scheme (TWSS)

Your employer may have availed of the TWSS in the three years prior to you leaving your job. If so, these payments are included when calculating your average salary for the SCSB.

Pandemic Unemployment Payment (PUP)

You may have been in receipt of the PUP in the three years prior to leaving your job. If so, this payment should not be included when calculating your average salary for the SCSB.  Instead, you can use the periods before and after you were laid off to work out your 36 months average salary.

Please note that periods in receipt of the PUP are considered breaks in service for the purposes of calculating total years of service.

  • Example

    Eileen worked with Company X from 6 June 2002 until 8 June 2020 (18 full years). She received a retirement lump sum of €60,000 (the first lump sum she has been paid). Eileen also received a lump sum of €11,000 from her work pension scheme. 

    Amount of Eileen's lump sum which is tax free
    Basic exemption CalculationValue

    Initial amount

     

    €10,160

    Add €765 for each complete year of service

    €765 x 18

    €13,770

    Basic exemption

     

    €23,930

    The increased exemption does not apply because the pension lump sum Eileen received is over the €10,000 limit.

    SCSB
     CalculationValue

    Calculate average annual pay for last three years

    		 €95,000/3

    €31,667

    Calculate 1/15 of the average annual pay

    		 €31,667/15

     €2,111

    Calculate amount due per years’ service

    €2,111 X 18

    €38,000

    Deduct the pension lump sum

    €38,000 - €11,000

    €27,000

    SCSB

    €0

    €27,000

    The SCSB is more beneficial to Eileen. She will be taxed on the balance of the termination payment that exceeds €27,000.

    The taxable amount of the lump sum she will receive is €33,000 (€60,000 - €27,000).

Note

Further details and examples on the taxation of termination lump sums can be found in Payments on Termination of an office or employment or removal from an office or employment.

Next: Compensation for a change in working practices

Published: 26 June 2024 Print this page

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