Losing your job is one of the most unsettling things that can happen. Even when it's handled fairly, even when the package is reasonable, it still involves a lot of uncertainty — about your income, your future, and your financial security. The last thing you need is to make a costly financial mistake in the middle of it all.
The good news is that Irish law provides strong protections for people facing redundancy, and there are tax reliefs and pension options that can make a very significant difference to the outcome — if you know about them. Here are the 10 most important things to consider, followed by a detailed look at what actually happens to your pension.
10 Things to Consider When You Are Made Redundant
1. Know your statutory entitlement
Your statutory redundancy payment is calculated as two weeks' gross pay for every complete year of service, plus one bonus week — with gross weekly pay capped at €600. So if you earn €800 per week and have worked for 10 years, your statutory payment is 21 weeks × €600 = €12,600. This payment is completely tax-free. It is not discretionary — it is a legal right, provided you have at least two years of continuous service. Use the official calculator at MyWelfare.ie to check your figure before accepting anything.
2. Understand the tax treatment before you sign
Your statutory payment is tax-free, but any ex-gratia payment on top may be taxable — with relief available through the Basic Exemption, Increased Exemption, or Standard Capital Superannuation Benefit (SCSB). Whichever gives you the larger tax-free amount applies. The SCSB is often significantly more generous for long-serving, higher-earning employees. The interaction between your redundancy payment and any pension lump sum is critical — getting this wrong can cost you thousands. Take advice before you agree to your final package.
3. Check how your pension interacts with your redundancy payment
This is the most complex and most important financial decision you'll face. The Increased Exemption — an additional €10,000 tax-free — is only available if you are not receiving a pension lump sum. If your pension lump sum exceeds €10,000, you lose the Increased Exemption entirely. Meanwhile, the SCSB calculation is reduced by the value of any pension lump sum you take. The sequence and structure of these payments matters enormously, and it's worth taking professional advice to ensure you're maximising your tax-free entitlements.
4. Find out what happens to your pension
Your pension does not disappear when you are made redundant — it is protected by law. With two or more years of service, your pension benefits must be preserved. You then have four main options: leave the pension in your former employer's scheme as a deferred benefit; transfer it to a new employer's scheme if you move jobs; transfer it to a Buy-Out Bond (Personal Retirement Bond) in your own name; or transfer it to a PRSA. Each option has different implications for charges, investment choice, access age, and estate planning.
5. If you're 50 or over — consider immediate pension access
This is one of the least well-known benefits available to older workers facing redundancy. If you are aged 50 or over at the time of redundancy, you may be able to take early retirement from your pension scheme — including a tax-free lump sum — immediately. You do not have to wait until 65 or 66. The rules depend on your specific scheme and pension type, but for many people in their 50s facing redundancy, accessing pension benefits immediately can make a significant positive difference to their financial position. This is absolutely worth exploring before you finalise your redundancy arrangements.
6. Consider a Buy-Out Bond for maximum control
A Buy-Out Bond — also known as a Personal Retirement Bond — allows you to transfer your occupational pension into a policy that is entirely in your own name, independent of your former employer. The trustees have no further involvement. You choose the investment funds, you control the timing of retirement, and you can access the benefits from age 50. This gives you significantly more control than leaving the money in your former employer's scheme, where investment choices may be limited and administrative changes can be frustrating to navigate. Each old employer pension needs its own separate Bond.
7. Don't forget about payment in lieu of notice and holiday pay
Your redundancy entitlements extend beyond the statutory payment. You are entitled to your statutory minimum notice period — ranging from one week (13 weeks to 2 years' service) up to eight weeks (15+ years' service), or whatever your contract specifies if it is longer. If your employer pays you instead of requiring you to work out your notice period, this Payment in Lieu of Notice (PILON) is generally taxable as income, unless your contract specifically provides for it. Any annual leave you have earned but not taken must also be paid out and is subject to normal income tax, USC, and PRSI.
8. Register for Jobseeker's Benefit promptly
If you are not moving immediately to a new job, register with the Department of Social Protection as soon as possible after your redundancy date. Jobseeker's Benefit is generally payable for up to nine months (234 days), based on your PRSI contribution record. Even if your redundancy payment means you don't need income support immediately, registering ensures you receive PRSI credits — which protect your State Pension entitlement. The State Pension is currently €299.30 per week and is payable from age 66. Gaps in your PRSI record can reduce it significantly.
9. Update your tax position with Revenue
In the year of redundancy, your tax situation changes. You will need to ensure your tax credits are correctly allocated — particularly if you take up new employment during the same tax year. If you have paid too much tax in the year of redundancy, you can claim a refund through Revenue's myAccount service. If your employer has not correctly applied the available exemptions to your redundancy payment, you can also make a claim through myEnquiries. Keep all your redundancy documentation — your RP50 form, P45, and any termination agreement — as you will need these for your tax return.
10. Take professional advice before making any decisions
Redundancy involves multiple interconnected financial decisions — your statutory entitlement, your ex-gratia payment, the tax treatment, your pension options, and your immediate income needs — all of which interact with each other. The order in which you take these decisions, and how they are structured, can make a very significant difference to the outcome. Signing a settlement agreement too quickly, or agreeing a pension lump sum without understanding the tax interaction, are among the most common and most costly mistakes people make. At PensionAdvice.ie, we help people facing redundancy understand their full position before they agree to anything. There's no charge for the initial conversation.
What Happens to Your Pension When You Are Made Redundant?
Your pension is protected by law — it cannot simply be taken away when you are made redundant. But what happens to it depends on your pension type, your length of service, your age, and the decisions you make in the weeks following your redundancy. Here's how it works.
If you have less than two years of service
With less than two years of qualifying pension scheme membership, you are generally entitled only to a refund of your own contributions. Your employer's contributions revert to the scheme. The refund is subject to a 20% tax deduction. It's a limited outcome, but it is what the rules provide for short-service employees. If you are approaching the two-year mark, it is worth being very precise about the vesting date before finalising any redundancy agreement.
If you have two or more years of service
With two or more years of service, your pension benefits are preserved — they cannot be taken away from you. You then have a choice of what to do with them. You can leave the pension in your former employer's scheme as a deferred benefit, accessible at the scheme's normal retirement age. You can transfer to a new employer's scheme if you take up new employment. You can transfer to a Buy-Out Bond (Personal Retirement Bond) in your own name — accessible from age 50. Or you can transfer to a PRSA, accessible from age 60 in most cases.
The Buy-Out Bond — the most popular option
For most people leaving employment, the Buy-Out Bond is the most practical and flexible option. It takes the pension out of your former employer's scheme and places it entirely in your own name. You are no longer dependent on the scheme's trustees, the employer's administration, or the investment funds they have chosen. You select the funds, you choose when to access the benefits from age 50 onwards, and the full value passes to your estate if you die before retirement. The main limitation is that a Buy-Out Bond accepts only one transfer — your former employer's pension goes in, and no further contributions can be added.
If you're aged 50 or over — early retirement may be possible
This is one of the most valuable and least well-understood options available to older workers facing redundancy. If you are 50 or over when your employment terminates, you may be eligible to take early retirement from your pension scheme — immediately, not at some future date. This means accessing your tax-free lump sum and beginning to draw your pension or move your remaining fund to an ARF (Approved Retirement Fund) right now. The rules depend on your specific scheme and pension type, and accessing your pension early must be carefully coordinated with the tax treatment of your redundancy payment. But for people in this age group, the financial impact can be very significant.
The interaction between your pension lump sum and your redundancy package
This is the single most important planning point in the entire redundancy process. If you are taking a pension lump sum at the same time as a redundancy payment, the two interact in a way that affects the tax relief available to you. Specifically, the Increased Exemption — which allows an additional €10,000 tax-free on your redundancy payment — requires that you are not receiving a pension lump sum now or in the future. And the SCSB calculation is reduced by the value of any pension lump sum. Getting the sequencing wrong — or failing to understand these interactions before you sign — is one of the most common and most expensive mistakes people make in this situation.
What about My Future Fund (auto-enrolment)?
If you were enrolled in Ireland's new auto-enrolment scheme — My Future Fund, which launched on 1 January 2026 — your contributions stop when your employment ends. Your accumulated pot remains invested and continues to grow, but there is no early access provision. You cannot access the My Future Fund until retirement age, regardless of redundancy. The State will not make further contributions during periods of unemployment. If you were both in a company occupational scheme and enrolled in My Future Fund, the two pots are treated completely separately — the occupational scheme options described above apply to the workplace pension, while the My Future Fund pot simply remains until retirement.
Your Pension Options at a Glance
Leave in old scheme — deferred until retirement age, with limited investment control and no further contributions.
Transfer to new scheme — only if you take up new employment with an occupational scheme, and subject to that scheme's rules.
Buy-Out Bond (PRB) — held in your own name, accessible from age 50, with full estate value on death. The most flexible option.
Transfer to PRSA — accessible from age 60 in most cases, and can be split into multiple pots for phased access.
Early retirement (50+) — immediate access to a tax-free lump sum and an ARF if eligible. Requires careful tax planning.