Losing a job is tough. There's a lot to process — your finances, your next steps, your sense of security. In the middle of all that, it's easy to overlook your pension. But the decisions you make about your pension in the weeks and months after redundancy can have a lasting impact on your retirement, so it's worth taking the time to understand your options.
When you're made redundant, both you and your employer stop contributing to the company pension scheme. But what happens to the money that's already been built up? That depends on a few things — mainly the type of scheme you were in, how long you were a member, and your age.
In general, you'll have four main options. You can leave the pension where it is and access it at the normal scheme retirement age. You can transfer it into a new employer's scheme if you move to another job. You can move it into a Buy Out Bond — also known as a Personal Retirement Bond — which is a personal pension held in your own name that you control completely. Or in some cases, you can transfer it to a PRSA. Each option has its own advantages and drawbacks depending on your goals.
One thing that's particularly worth knowing: if you're aged 50 or over and your employment is being terminated, you may be entitled to access your pension benefits immediately, including a tax-free lump sum. This is something a lot of people aren't aware of, and it can be a significant financial benefit at what is often a difficult time. It's not automatic, and the rules vary by scheme, but it's absolutely worth exploring.
There's also the question of your overall redundancy package and how the pension fits into that picture. The lifetime limit on tax-free lump sums from pensions is €200,000, and redundancy payments have their own tax-free thresholds. Co-ordinating how you handle both can make a meaningful difference to the amount you actually keep. Getting advice before decisions are finalised is much better than trying to unwind something after the fact.
If you're in a defined benefit scheme — the kind that promises a set income in retirement — there are some additional considerations. Some of these schemes are underfunded, which can affect the benefits they're able to pay out. Securing your value by transferring to a buy-out bond at the right time may be in your interests, but it needs careful assessment.
We work with people across Ireland who have recently been made redundant to help them understand their pension options quickly and clearly. We explain what you're entitled to, what the various routes look like, and what makes most sense for your specific circumstances — all in plain English, without any pressure. Your pension is something you've spent years building up. Let's make sure it's protected.