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Families who have lost loved ones and are awaiting payments from the Civil Service Pension scheme face the risk of being unfairly taxed due to prolonged administrative delays. According to the rules set by HM Revenue & Customs (HMRC), certain lump sum pension payments must be made within two years of the pension administrators being informed of a death to qualify as tax-free. Failure to meet this deadline means the lump sum may be subject to income tax, placing additional financial burdens on already grieving families.
Sir Geoffrey Clifton-Brown, the Conservative MP and chair of the Public Accounts Committee, described the situation as “unconscionable,” highlighting how families might be forced to pay what he terms a “death tax” despite no fault of their own. The Cabinet Office acknowledged the issue and noted that mechanisms like the Pensions Ombudsman exist for compensation claims if a tax charge arises from such delays. However, the Ombudsman has indicated that standard cases may take around 18 months to resolve, with more complex disputes potentially lasting longer.
The Civil Service Pension scheme, responsible for managing retirement benefits for 1.7 million public sector employees, experienced a significant backlog after outsourcing its administration to Capita in December 2025. Capita inherited over 86,000 unresolved cases from the previous administrator, MyCSP, and despite a two-year preparatory period, the backlog peaked at 120,000 cases by February. Delays in processing have led retired civil servants and bereaved families to wait months for payments, often causing severe financial difficulties. As of the end of September, 1,643 bereavement-related cases remained outstanding for over 100 days, with just 301 expected to be paid within the following fortnight.
Rob Wassell, a bereaved family member, has personally experienced these delays, having waited nearly two years for a lump sum payment following his brother’s death. The approaching two-year mark threatens to trigger a tax charge that Rob believes is unjust. Speaking about his ordeal, he said: “It’s a bitter pill to swallow to have to pay tax for something which was not my fault. It creates unnecessary worry and anguish through the process, which is already in itself difficult.” Trade union PCS also criticized the ongoing issues, warning that families should not suffer financial penalties for administrative failings. The Cabinet Office has pledged to hold Capita accountable, retaining nearly £10 million in payments, and remains committed to ensuring no member is left financially disadvantaged by these delays. Capita, meanwhile, apologized for the distress caused and emphasized its efforts to prioritize and resolve cases involving those in greatest need
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