Bereaved families face tax bills from pension payment delays

Summarised from 2 outlets · Updated 21 Oct, 12:32 · Archive

Bereaved families affected by civil service pension delays could face tax bills through no fault of their own, Parliament has been warned. Under HMRC rules, certain lump sum pension payments must be paid within two years of a scheme being notified of a death to remain tax-free. Conservative MP Sir Geoffrey Clifton-Brown, who chairs the Public Accounts Committee, said the "chaos" at the civil service pension scheme means the likelihood of payments being made within the deadline is "slim", potentially hitting families with an "unconscionable" tax bill.

Capita took over administration of the Civil Service Pension scheme in December 2025 from MyCSP, inheriting a backlog of more than 86,000 cases. By February, the backlog had grown to 120,000 cases. According to figures up to 30 September, 1,643 outstanding bereavement and death in service cases are more than 100 days old, with only 301 in scope to be paid within 15 days. Families have reported struggling to pay bills because of the delays.

The Cabinet Office said it was unable to prevent HMRC from taxing delayed claims and that affected families would have to claim compensation through the Pensions Ombudsman. However, the ombudsman is currently advising that standard complaints are only likely to be resolved within 18 months.

How it is being reported

• Bereaved civil service families could face ‘unjust’ tax bills due to pension scheme delaysMPs say ‘chaos’ at Capita-run scheme could mean some claims miss tax-free time limit on lump sum payments Bereaved families could face “unconscionable” tax bills because of “chaos” in the civil service pension scheme, the government has been warned. Some lump sum pension payments to families are only tax-free if made within two years of a scheme being told of the member’s death. Continue reading...The Guardian · 21 Oct, 12:12
• Bereaved families could face 'unjust' tax bill after civil service pension delaysThe chairman of Parliament's Public Accounts Committee says families should not be taxed through no fault of their own.BBC Politics · 19 Oct, 12:34

In this story: Capita · Civil Service Pension · Geoffrey Clifton-Brown · HMRC · Pensions Ombudsman · Cabinet Office

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