Qualified Financial Adviser (QFA) Pensions Exam 2 Practice Test

Ex-gratia termination payments are discretionary sums paid when you leave a job, not part of a contractual redundancy package. The tax rules set a lifetime cap on how much of these payments can be received tax-free, and that cap is €200,000. This limit applies across all employments and all years, so the total tax-free amount from any ex-gratia termination payments you receive over your career cannot exceed €200,000. Any amount above €200,000 is taxed as employment income in the year it’s received, at your marginal tax rate (subject to normal PAYE/PRSI/USC rules). For example, if you’ve already received €180,000 tax-free and then get €30,000 more, only €20,000 would remain tax-free; the extra €10,000 would be taxable. That’s why the correct limit is €200,000—the lifetime cap on tax-free ex-gratia termination payments.