Pension lump sum payments paid into Will trust

When Pension Trustees elect to pay discretionary lump-sum death-payments into the Will Trust set up by the deceased’s Will, how are these funds taxed within the trust?

Is the deceased deemed to be the settlor of the funds, as he is with the other funds in trust? But the pension lump-sum funds were never in the deceased’s estate, and were not taxable for IHT following his death.

Tobias Gleed-Owen
Hewitsons LLP

have a look at this.

Cindy Chaplin
Larking Gowen

The pension trustees are exercising a power of appointment to resettle the pension scheme funds. Doing so will not normally affect the identity of the settlor (see, for example, Pilkington v IRC [1964] AC 612). The settlor of the pension scheme funds will usually be the scheme member, on the basis that he has directly or indirectly provided the funds (s. 44(1) IHTA 1984). Where contributions have been made by the member’s employer, HMRC’s position (as expressed at IHTM17085) is that the scheme member will always be the settlor, but this appears to be a fairly extreme view.

Matthew Harrison
STP Advisors