Bereaved families risk unfair tax bills due to civil service pension delays

Bereaved families affected by severe delays in receiving civil service pension payouts could face an unjust tax liability, the government has been warned.

HMRC regulations stipulate that certain lump‑sum pension payments must be made within two years of a death being reported to the scheme to retain their tax‑free status. If the payment is delayed beyond this window, the amount may become taxable.

Sir Geoffrey Clifton‑Brown, Conservative MP and chair of Parliament’s Public Accounts Committee, described the situation as “unconscionable,” warning that families could be hit with a “death tax” through no fault of their own.

The Cabinet Office responded that any tax charge resulting from the delay could be addressed through existing compensation routes, including a claim to the Pensions Ombudsman.

However, the Ombudsman currently indicates that standard complaints typically take up to 18 months to resolve, while more complex cases may require a longer period.

The Civil Service Pension scheme provides for 1.7 million public‑sector workers across the United Kingdom.

Capita assumed administration of the scheme from MyCSP in December 2025, inheriting a backlog of over 86 000 cases.

Despite a two‑year transition period leading up to the handover, difficulties have persisted, and the backlog had risen to 120 000 cases by February.

Retired civil servants and their bereaved families have been waiting months for their pension payments, leaving some struggling to meet essential expenses.

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