Your employer might agree to pay some or all the taxable part of your redundancy payment into your pension on your behalf.
If they agree to this, you’ll not only benefit from not having to pay tax on the money but you could also ask them if they will add to the payment the saving they make from not having to pay National Insurance. This is known as redundancy sacrifice.
If your employer won’t agree to this, you can arrange to pay the money into a pension yourself.
It’s also important to check with the employer and your pension provider what the options are and how the tax relief will be handled.
In some cases, the pension will claim any basic rate tax relief on your behalf, and you’ll have to claim any higher rate tax relief yourself. In other cases, no tax relief will be claimed by the scheme and you’ll have to claim all of this yourself.
If you use the redundancysalary sacrifice method the correct tax relief will be received automatically.