UK Government Removes Pension Tax Deadline for Bereaved Families

The UK government removed a two-year tax deadline for lump sum pension death benefits effective October 28, ensuring these payments remain tax-free regardless of administrative delays. Previously, HM Revenue and Customs rules mandated that payments made more than two years after a pension scheme was notified of a death became taxable.

Torsten Bell, the Pensions Minister, stated the change makes the position fairer for grieving families. He clarified that removing the deadline does not remove the duty of pension schemes to administer payments without avoidable delay. Families who have already been taxed due to these delays can seek compensation through the Pensions Ombudsman or existing complaints processes.

The policy shift follows severe backlogs in the Civil Service Pension scheme. Outsourcing firm Capita inherited 86,000 cases in December 2025, a figure that grew to 120,000 by February. The Public and Commercial Services Union criticized the failures, arguing that bereaved families should not pay the price for systemic errors.