Key facts
- Bereaved families may face tax bills if death benefit pension payments exceed a two-year threshold due to administrative delays.
- Over 1,600 families have waited more than 100 days for death benefit claims to be processed.
- The PAC has called for legislative changes to prevent families from paying for administrative failures.
- The Cabinet Office is holding back nearly £10m from Capita due to service level failures.
- The Pensions Ombudsman estimates an 18-month wait for case resolution.
Bereaved families of civil servants could face significant tax bills due to administrative delays in processing pension payments, according to a warning issued to the government. Payments exceeding the two-year tax-free threshold risk being taxed at the recipient's personal rate. The issue stems from chaos within the civil service pension scheme, managed by Capita, with over 1,600 claims pending for more than 100 days. Some families are struggling to pay bills because of the delays. Geoffrey Clifton-Brown, chair of the Commons public accounts committee (PAC), stated that the "chaos" makes it unlikely for death benefit payments to be made within two years, potentially leading to "unjust financial penalty" for families. The Cabinet Office said it cannot prevent HM Revenue and Customs from taxing delayed claims and that affected members must seek redress through the Pensions Ombudsman, which faces an estimated 18-month wait. The government has faced criticism for outsourcing the scheme to private companies that have failed to deliver. The Cabinet Office acknowledged service levels were "unacceptable" and is holding back nearly £10m from Capita. A dedicated email address has been set up for unions to escalate cases of severe hardship, including claimants at risk of suicide or losing their homes. Clare Norris has been waiting 11 months for payments after her husband died last November, stating the lack of clarity has worsened the experience.