Redundancy pension tax - A question for a finance expert please?

Adding to the above answer, yes you could simply put the £48,000 into a pension scheme and you would pay the net amount. While the state retirement age is 65, you can retire at 55 from a personal pension. You could also retire from a final salary scheme at 55 but there would be penalties for retiring early as most schemes have a normal retirement age of 65 (also the rules may not allow you to retire early.) Trying to keep it simple, but you have a good opportunity to save tax and plan for retirement I assume you have worked for nearly all this tax year. If your redundency payment is £78k you must of been on a good salary. Lets assume your salary and the £48k give you a total taxable income for the 2011-12 tax year of more than £100k you need to remember you start loosing your personal allowance once you have an income over £100k. If this is the case you should seriously consider making a pension contribution as you can effectivley get tax relief at 60%. As you would pay the contribution net of 20% tax and then reclaim the further 20% in your self assement along with your personal allowance. Which depending on the amount can come to tax relief of up to 60%. Also there is a new way of receiving benefits from a pension scheme Flexible Drawdown, this means you can take the 25% tax free and the remaining 75% can also be taken as a taxable lump sum. There are certain conditions that need to be met, the main one of having secured pension income of £20,000 per annum (which can include state pension). If you plan when you take income via flexible drawdown, you could effectivley reduce the tax you pay on the £48,000 down to 15%. By just receving enough to keep you a basic rate tax payer. So if you have earned including the taxable part of you redundancy payment over £100k speak to an ifa check out unbiased.co.uk for a local one. While they will charge you for advice as long as it and pensioin company charge are less than the tax you pay you should be ahead. Also get them to look at any pension scheme you already have and your predicted State pension as i would think that they will meet the £20k income required for Flexible Drawdown Just in response to Petrusclavus what I suggest is not tax evasion, only tax avoidance. Which is legal, maybe unethical but as someone said to me "I've worked hard 40 years of my life why cant I claim all I can" and also a good definition of a pension scheme its " a tax deferal plan". If his income is over £100k he has to make a contribution to reduce his tax bill this year (although you could amend his pension plan to change which tax years the contributions get accounted in) In this case all the criteria may not be met. But you can check the Pension rules on the HMRC website if you dont beleive me. However, I dont think HMRC realised how people would use the new rules to their benefit and so I guess they may change them in the future if alot of people try to do what I suggest is possible.

The first 30K of your redundancy is tax free. Put it in and take it out is tax evasion - I personally would ask for an assessment on that (pity my manager wouldn't agree though). This is finance not the Hokey Cokey. You can put a lot into your pension fund now that is true - but you are not at state retirement age. Within your personal limit you can dump cash to the pension fund and that will increase the standard band (that's how we count) but dump in and take out straight away simply will not be accepted. At least leave it in until the next financial year - some degree of beleivability please.

Yes you can certainly do that, you may be able to put the lot in if you have not got other plans . I love bacon has summed it up very well. One thing is you can also have temporary annuities which are half way between draw down and buying an annuity outright.

Of course you can. Bacon has summed it up nicely. Ignore lack of knowledge and petrusclavus.