IHT and pension payment

[steven13]

I was the Executor and sole beneficiary under my fathers Will. He died in 2015 and I agreed his Estate with HMRC in 2016, with no IHT liability.
During my fathers latter years he was in receipt of an employers pension through a Nortel Pension Plan. The Plan was placed in Administration in 2009 and restrictions were applied to the pension payments to members, including my father.
I have just been informed that the Plan is now being wound up and the restrictions which previously applied are lifted and that I am due to receive as the Executor of my fathers Estate an amount of £221, gross there being no tax deducted. I am also advised that of this amount £85 is being paid under a discretionary trust and is being paid at the discretion of the Trustees.
The addition of £221 will not create any IHT liability. I also presume the subsequent payment to me as sole beneficiary is not taxable. However presumably this receipt is income of the Estate and I should pay some kind of tax on it? Nor do I quite understand the significance of the part paid under a discretionary trust. The amounts involved are not large but I dont want to fall foul of the tax authorities. Any advice would be appreciated

[jerome.lane]

Usually when a pension is wound up or a trivial/small lump sum payment is made, either PAYE is operated in full or 25% is treated as tax free. The pension administrators should deal with this so that you receive an amount with tax already deducted. If you are a higher rate tax payer, then you may have a small tax liability on top of what has already been paid. Considering the sums involved and it sounding like the pension was actually in a negative position, there might be some other provision that means there is no tax to pay anyway. Pensions in administration are massively complicated and it takes years to unravel. If you are a basic rate tax payer, then you shouldn’t have anything to worry about. If you have minimal income, you might be able to reclaim any tax deducted. The main point though is that the administrators of the pension should deal with the tax position and then you may have a further step to take although it’s unlikely to have any ramifications.

[steven13]

Thank you kindly for your reply. However the payment is being made to me as the Executor of my grandfathers estate. Adding the amount to the value of my grandfathers estate will not give rise to an IHT liability. The payment then to myself as sole beneficiary will presumably be a final distribution from the Estate and wont be taxable.
However the amount is income of the Estate and is presumably taxable, and im not too sure whether the part being paid under the discretionary trust is treated differently to the balance.

[jerome.lane]

Without seeing detail it's hard to say anything. Maybe the payments are just compensation payments that aren't taxable. I've never known a pension distribution to not come with some sort of advice or an indication of how the payment should be taxed. If the pension Trustees do not deduct tax, you can almost safely assume there is nothing to worry about especially considering the amount involved.