Pension conundrum

My client’s wife died in February 2009 as a result of a cancer-related illness. As part of her pension package with her previous employer her pension was guaranteed for a minimum period of five years from retirement (September 2007).

Sadly she only survived for 18 months and my client has now received a lump sum of about £60 000 in respect of the balance of pension payments due for the remaining three and a half year period.

The following facts may be relevant. The pension fund was aware of her ill health when the pension was initially payable but declined to offer her an impaired annuity/pension at that time.

I believe that no tax has been deducted from the payment to my client although this is not entirely clear from correspondence received from the scheme administrators.

All they will say is that the payment is not...