Employment pension advice

Your annual pension is taxable, but if it is your only source of income, it will be lower than your personal allowance, so no tax will be payable by you.

If you have other sources of income (including the state pension) that push your total income over the annual allowance (currently £11,850 p.a.), then you'll start paying tax at 20% of anything over the £11,850.

Are the annual pensions offered with the £30K and £59K lump sums also index-linked? Index linking is absolutely necessary and very valuable, unless you have a terminal illness and expect to die within a couple of years.

If not, then you might need to consider the £64K lump sum, as it is the only one that provides some protection against inflation.

The investment decision with the lump sum very much depends on the duration you expect to want to spend it over. If you want to spend it over the next seven years, keep it as cash in savings accounts. If you want to spend it over a longer period, invest it in a Stocks & Shares (S&S) ISA or possibly a SIPP. You can get tax relief on money you put into a SIPP, and because the SIPP is a Defined Contribution (DC) pension, you will be able to take 25% of the value out tax-free, the rest will be added to you pension income. If you invest in n S&S ISA, you don't get tax relief, but you don't pay tax on the money when you take it out, so the S&S ISA should result in you paying less tax overall. The one issue with a S&S ISA is that you can only put in £20K per annum, so you will need to load the ISA over a number of years. If you took the 30K lump sum, you could pay £20K in this tax year, and the remaining £10K in on 6th April when the new tax year starts. You might also decide to save the £10K in an instant access savings account to use for emergencies, e.g. when househole appliances break down or maintenance needs doing on your house.

Hope this helps