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[Terbs]

I have some small pensions with Rothesay. Mainly residue left over from previous transfers. I have had a letter from them offering me one off lump sum payments. Anybody else had this offer from a pension company.

I don't understand tax codes, but the biggest pension is £960 per year. This is paid £80 month, but they stop £36 pm tax. Giving me £44.
Obviously, they are stopping tax also from the amount my state pension is over the £12,570 tax allowance.
They have offered me £8,500 final lump sum payment. What I am concerned about is how they are going to tax it.
Any suggestions

[LC0112G]

Chances are the £8500 will be classed as income in the tax year you receive it, so will be taxed at 20/40/45% depending on what your marginal rate of tax is in that year.

However, it's also possible that HMRC will initially think you are going to receive £8500 every month for the rest of the year, rather than just as a one off payment. If that happens you may pay a large amount of tax initially, particularly if it's paid in April/May, but the excess will then be refunded the throughout the year.

If they're offering £8500 to buy you out of a £960 p/a pension, then they will 'lose'/you will 'win' if you live less than 8.85 years. They will 'win'/you will 'lose' if you live more than 8.85 years. So "do ya feel lucky punk  - well do ya?"

[omega2018]

Agree HMRC are crap on one off payments and will often treat them as if you're going to get the same every month.  I'm assuming these are defined contribution pensions not defined benefits (AKA final salary).  Personally I would (and have) transfer them all into one SIPP with a low cost provider like Vanguard.  That way you'll know you are getting near enough the full value and you can then decide how and when to take the benefits, probably a 25% tax free lump sum then drawdown what you want/fits with your tax situation, as and when you want.