Lines, 47, followed up a 3-0 win over the Scot with a 4-0 defeat of England's 1991 world champion John Parrott.
The event in Scunthorpe offers the winner a place in the World Championship qualifying event.
Now aged 48, Hendry retired after being knocked out of the 2012 World Championship.
"I didn't play well. It feels like somebody else's arm out there," he said after losing to Lines.
Peter Lines defeated seven-time world champion Stephen Hendry in the semi-finals on his way to winning the World Seniors Championship.