Civil Service Pension Delays Risk Taxing Bereaved Families

Administrative delays in the civil service pension scheme may leave bereaved families facing significant tax bills on lump sum payments. Under HM Revenue and Customs rules, payments for members who die under age 75 must be processed within two years to remain tax-free; otherwise, they are taxed at the recipient's marginal rate.

More than 1,600 families have waited over 100 days for claims to be processed. Geoffrey Clifton-Brown, chair of the Commons public accounts committee, described the state of the scheme as "chaos" and warned that the likelihood of death benefit payments being made within the two-year window is slim.

The scheme is managed by Capita, which took over the £239m contract last December after the failure of a previous contractor, MyCSP. The Cabinet Office has acknowledged that service levels were "unacceptable" and has withheld nearly £10m in payments to hold Capita accountable. Despite this, the government maintains that affected families must seek redress through the Pensions Ombudsman, which currently reports an 18-month backlog.