Statutory pay at 60+
At age 60+, most of your service years sit in the 41+ band where each year counts as 1.5 weeks of capped weekly pay. Common situations:
20+ years' service, all in 41+ band (started at 40 or later): - 20 × 1.5 × £719 = £21,570 — the statutory maximum
20+ years' service, split across age bands (started at 35, made redundant at 60): - Years 1–6 (aged 35–40): 6 × 1 × £719 = £4,314 - Years 7–20 (aged 41–54, all 41+): 14 × 1.5 × £719 = £15,099 - Total: £19,413
15 years' service starting at 45: - All 15 years in 41+ band: 15 × 1.5 × £719 = £16,178
The statutory cap of £21,570 means very long tenure (25+ years) doesn't increase statutory pay above 20 years — the cap bites.
Enhanced redundancy is often substantial at 60+
Many large employers have specific over-60 / pre-retirement enhanced redundancy provisions:
- Full salary multiplier: e.g. "3 weeks per year of service, no caps"
- Long-service tier: e.g. extra week per year after 15 years
- Early retirement bridge: lump sum funded from pension scheme reserves
- Pension access enhancement: some DB schemes provide accelerated retirement without actuarial reduction
A £55,000 over-60 employee with 25 years' service on a "3 weeks per year, no caps" enhanced scheme: - Weekly pay: £55,000 / 52 = £1,058 - 25 × 3 × £1,058 = £79,346 enhanced (no service cap in enhanced scheme)
Combined with statutory (capped at £21,570), notice, holiday, this can produce packages of £100,000+ for senior over-60s with long tenure.
The £30,000 threshold + 25% tax-free pension lump sum
The over-60 unique tax advantage: stacking the £30,000 redundancy tax-free threshold with the 25% tax-free pension lump sum.
Example: 62-year-old, £100,000 enhanced redundancy package + £300,000 DC pension pot
Redundancy: - First £30,000 tax-free - £70,000 above-threshold at marginal rate (likely 40%) = £28,000 tax
Pension: - 25% of £300,000 = £75,000 tax-free lump sum - £225,000 remaining is taxed as income when drawn
Total tax-free cash available immediately: £30,000 + £75,000 = £105,000
This stacking is unique to the over-55 cohort and one of the most tax-efficient combinations in UK personal finance.
Bridging redundancy to State Pension
State Pension age: - Born before April 1960: 66 - Born April 1960 to April 1961: 66+ - Born April 1961 onward: rising to 67 by 2028
For someone made redundant at 60: - 6 years until State Pension age 66 (or 7 to 67) - Need to fund living costs across this gap from: redundancy + pension drawdown + any other savings
A typical bridging spend of £30,000–£40,000/year for 6 years = £180,000–£240,000 total. Whether the redundancy + pension lump sum + drawdown covers this depends on lifestyle, location, and other assets.
Worked example — 62-year-old, £80,000 salary, 25 years' service
Statutory: £21,570 (max)
Enhanced (2 weeks/year, full salary, no caps): 25 × 2 × £1,538 = £76,923
Total redundancy: £98,493
Notice (3 months contract): £20,000 gross, ~£12,800 net Holiday (4 weeks accrued): £6,154 gross, ~£4,000 net
Tax structuring options:
- Take it all as cash:
- £30,000 tax-free + £68,493 at 40% = £27,397 tax
-
- notice/holiday after tax
-
Net from package: ~£95,250
-
Sacrifice £58,493 of above-threshold into pension (within £60k annual allowance):
- £30,000 tax-free (cash) + £10,000 at 40% tax = £4,000 tax
- £58,493 → pension (tax-free at point of sacrifice)
-
- notice/holiday after tax
- Net cash from package: ~£42,800
- Pension increase: £58,493
-
Effective tax saving from sacrifice: £23,397 (£58,493 × 40%)
-
Then access pension 25% tax-free (£300k pot becomes £358k after sacrifice; 25% = £89,500 tax-free cash):
- Combined immediate tax-free cash: £30,000 (redundancy) + £89,500 (pension) = £119,500
- Versus option 1's £30,000 tax-free + nothing from pension = £30,000
The pension-sacrifice + 25% lump sum stack is the most powerful single tax move available at this career stage.
Age discrimination at 60+
The Equality Act 2010 protects regardless of age. Common patterns to watch:
- "Approaching retirement age" as selection rationale — unlawful unless tied to objective performance/business criteria
- Pension proximity as tiebreaker — unlawful
- Voluntary redundancy targeted at older workers — lawful if equally available to all, but should not be coerced
Worth noting: there's NO upper age limit on redundancy entitlement. Employees over State Pension age still get statutory + enhanced + £30,000 tax-free treatment.
What employers often offer over-60s
Common bespoke over-60 packages:
- Enhanced early retirement — pension benefits accelerated
- Bridging payment — cash bridge from now to State Pension age
- Phased retirement — reduced hours moving to full retirement over 12-24 months
- Consultancy retainer — switch from PAYE to self-employed contractor for a defined period
- Pension top-up — employer contribution boost as part of severance
These are negotiable and often more valuable than equivalent cash. Settlement agreements at this stage are also more common — get independent legal advice (usually employer-funded).
State Pension claim timing
If you're at or past State Pension age: - You can claim immediately - You can defer — each year deferred adds 5.8% to your State Pension permanently - Deferral might pay if you have other income and don't need the State Pension yet - Health/longevity considerations matter — deferral takes ~17 years to break even
If you're below State Pension age: - Pension drawdown from DC scheme + redundancy lump sum + any savings need to bridge - Universal Credit / Pension Credit might be available depending on income - New Style Jobseeker's Allowance (contributory) is available for those who've paid NI recently
Practical checklist
- Verify statutory calculation — likely at or near the £21,570 cap
- Map enhanced terms in full — including any over-60-specific provisions
- Tax structuring — pension sacrifice on above-threshold portion is usually optimal
- Pension access planning — 25% tax-free lump sum + drawdown strategy
- State Pension age — confirm yours and plan around it
- Pension Wise — free 60-minute guidance for over-50s; book this
- DB pension review — if you have one, check early-retirement provisions
- Spending plan — model 6-7 years of spending against available resources
In short
Over-60 redundancy is often an early-retirement event rather than a career transition. The combination of maximum statutory pay, enhanced package, pension 25% tax-free lump sum, and proximity to State Pension creates unique planning opportunities. Pension sacrifice on the above-threshold portion is typically the highest-value move. Pension Wise (free) and a qualified financial adviser are both worth using here — the decisions made now compound across 20-30 years of retirement. For broader context see the redundancy hub → and redundancy-and-pension →.