So I need to pay income tax on pension redress settlement?

TheWelshDragoness

Hello,
Back in 2010 I was offered a small cash incentive to move my defined benefit pension out of the fund.  A large firm of advisors was appointed by the fund at the time to advise me through the process.  I accepted the incentive and moved in to a SIPP.  
The advisors wrote to me last year to say that they were looking at my case and have concluded that I was advised incorrectly. They have offered a £34k compensation payment (£13k was the transfer amount).
The offer skirts around the issue of tax, and also does not break down how the offer was calculated.  I have requested this information 3 times (quoting the Omdudsman website of need for copy of calculation) and the company has refused 3 times. However, they have clarified that income tax has not been taken out of the settlement in their calculation.
My question is do I need to pay income tax on this compensation? The advisor company says not, but my current financial advisor thinks I should (he is a pension specialist). I have called the HMRC helpline and without hearing any detail, the advisor just said yes, income tax is payable. 
If income tax is payable, then the offer clearly would not restore the financial situation as intended if the advice had not been taken as I am a higher rate tax payer. I would therefore consider the offer unfair, and decline, with the intent of making a complaint through the Ombudsman.
I appreciate this is a complex question.  Just a recommendation of where to seek advice that I can believe as correct which help hugely.  So far, the FSA and FOS websites have been insufficiently detailed to help.
Thanks!

Marcon

TheWelshDragoness said:

Hello,
Back in 2010 I was offered a small cash incentive to move my defined benefit pension out of the fund.  A large firm of advisors was appointed by the fund at the time to advise me through the process.  I accepted the incentive and moved in to a SIPP.  
The advisors wrote to me last year to say that they were looking at my case and have concluded that I was advised incorrectly. They have offered a £34k compensation payment (£13k was the transfer amount).
The offer skirts around the issue of tax, and also does not break down how the offer was calculated.  I have requested this information 3 times (quoting the Omdudsman website of need for copy of calculation) and the company has refused 3 times. However, they have clarified that income tax has not been taken out of the settlement in their calculation.
My question is do I need to pay income tax on this compensation? The advisor company says not, but my current financial advisor thinks I should (he is a pension specialist). I have called the HMRC helpline and without hearing any detail, the advisor just said yes, income tax is payable. 
If income tax is payable, then the offer clearly would not restore the financial situation as intended if the advice had not been taken as I am a higher rate tax payer. I would therefore consider the offer unfair, and decline, with the intent of making a complaint through the Ombudsman.
I appreciate this is a complex question.  Just a recommendation of where to seek advice that I can believe as correct which help hugely.  So far, the FSA and FOS websites have been insufficiently detailed to help.
Thanks!

This question has popped up many times on this forum. The most helpful reference (and the most up to date I could spot) seems to be https://www.fca.org.uk/publication/finalised-guidance/fg17-9.pdf