Prudential - cash lump sum or continue with monthly payments

xylophone

 If all she receives is a basic State Pension - say £11,000 

A full basic state pension is  £8814 a year.

However, at 82 years old,  she is likely to have started work in the mid fifties and may well have Graduated Pension and SERPS on her own contributions and (if she is a widow), inherited Grad/SERPS/S2P from a late spouse.

This could easily take her SP to over £12,570 a year.

Secret2ndAccount

Nodody pays 50% tax!
If you have State Pension + personal pension, they deduct no tax from the SP and, if possible, all of the tax from the personal pension. This can make the tax on the 2nd pension look scary. But the total tax is fair.
Add together all of your pensions, April to April. Deduct £12,570.  You pay 20% of the rest in tax. (Rate goes up beyond about 50k).
The government has decided never to take more than 50% of a 2nd or 3rd pension in tax. That's why there are people seeing 50% deductions. Something to be wary of if you are seeing 50% deduction is that you could be receiving a bill for more tax down the line.
Example:  State Pension £14.570  Personal pension £1,000
Total: £15,570   subtract £12,570.   Tax to pay on £3,000
20% of £3000 = £600
The £1,000 personal pension would be taxed at 50%, collecting £500.
Pensioner would end the year owing £100 in unpaid tax...
For £100 I don't think they pursue you. Maybe they would try to collect it next year by changing your tax code. That wouldn't work in the example given. The tax owed would just mount up, at about £100/yr until they decided to write and ask you for the money.

badmemory

Nobody pays 50% tax!

Yes they do.  What I would be worried about is them taking 50% of the buyout in tax & then having to fight to get some of it back & they do chase for £100 underpaid.  If there is no or not enough income to get the tax from they will do a simple assessment, which will need checking carefully & payment is due in the same time frame as self assessment.

Re simple assessment - I have been subjected to this since it started rather than being able to do self assessment.  I look forward to the first year they get it right.