SCSB: How Irish Tech Workers Keep More of Their Redundancy Tax-Free
You know your ARR. You know your OTE. You probably know your FYQ numbers better than your kids’ timetables.
Here is one you might not know. SCSB.
It stands for Standard Capital Superannuation Benefit. A mouthful, and a terrible name for something this valuable. And in a year of layoffs across tech, it might be the most valuable acronym on that list.
Because SCSB decides how much of your redundancy you get to keep, tax free.
If you are made redundant in Ireland, your package usually comes in two parts. Statutory redundancy, which is always tax free. Then the ex gratia part, the lump sum your employer adds on top. That is where the tax can take a brutal bite, at your top rate, unless you protect it.
Revenue gives you three ways to shield that lump sum, and you get to use the biggest of the three. For most people with a decent salary and a few years of service, the biggest is the SCSB.
Here is the SCSB, in plain English. Take your average pay over the last three years. Multiply it by your number of full years of service. Divide that by fifteen. Then subtract any tax free lump sum you are taking from your pension. That is how much of your redundancy comes to you tax free.
One thing tech people miss. “Pay” here is not just base salary. It includes your bonus and your vested shares. For a lot of you, that makes the number far bigger than you would guess.
Two examples. Same rule. Very different outcomes.
Aoife has five years at her company on ninety thousand a year. Her sum is 90,000 times 5, divided by 15. That is 30,000 euro, tax free. The standard exemption would have given her about 14,000. The SCSB more than doubles it.
David has fifteen years in on two hundred and fifty thousand a year. His sum is 250,000 times 15, divided by 15. That is 250,000 euro. But there is a ceiling. The most anyone can take tax free from redundancy, across a whole lifetime, is 200,000 euro. So David shields 200,000 and pays tax on the rest.
Same formula. One nearly doubles her tax free money. The other hits the cap. Both are far better off for knowing the number before the meeting, not after.
There is one more move here, the one that quietly saves the most money. Look again at that last step, where you subtract your pension lump sum. If you are due a big tax free lump sum from your company pension, it eats straight into your SCSB. Euro for euro.
So some people choose to waive their right to that pension lump sum. That drops the subtraction to zero and pushes the tax free redundancy back up.
Giving up a tax free lump sum sounds mad. But this is exactly the kind of quiet decision where one signature is worth tens of thousands.
Here is the move. You waive the lump sum to protect the redundancy now. Then you transfer your company pension into a PRSA. And a PRSA can still pay you a tax free lump sum later, at retirement. In the right situation, you keep the tax free redundancy today and the tax free lump sum down the line.
I will be straight with you. This is not automatic and it is not for everyone. It depends on your scheme, your numbers, and how Revenue views your case. This is the point where you stop reading articles and talk to someone who can run your actual figures.
“Within a few sessions, I had a proper investment strategy, maxed out my pension AVCs, and claimed 5,478 euro back. The peace of mind alone made this worth it.” Robert Masterson
So here is what I would ask you to do this weekend. You do not need to be facing redundancy to learn your SCSB. The worst time to learn it is the week it lands, when you are stressed and signing things fast.
Work it out now. Average pay over three years, times your years of service, divided by fifteen. Write the number down.
Knowing it changes how you see everything. Your pension. Your choices. How trapped, or how free, you actually are. That is the whole point of this. Not fear. Options.
This is general information, not personal advice. Redundancy is a big, one-off decision with real money on the line. When you are facing it, get proper advice from a qualified professional who can look at your own numbers before you sign anything.
If you would like my help figuring out your finances, here is a short video on what I actually do: https://go.bamillionaire.com/watch-now. Or if you are ready, book your Clarity call: https://go.bamillionaire.com/apply
Want this in your inbox every Saturday, before it reaches the blog? Subscribe below.
