Bereaved families will not face tax bill over pension delays under new rules
Source: BBC ·
Campaigners had warned some families could face an unfair financial penalty because of delays which were not their fault.
From the source
Bereaved families will no longer be hit by an unexpected tax bill because of severe delays paying out civil service pensions, following a change in Wednesday's Budget. Under previous HMRC rules, certain lump sum pension payments had to be paid within two years of the pension scheme being notified of a death to remain tax-free. Campaigners had warned some families could face an unfair financial penalty because of delays which were not their fault. The government has now changed the rules so payments will no longer become taxable solely because more than two years has passed. The Civil Service Pension scheme manages the pensions of 1.7 million public sector workers in the UK. Outsourcing firm Capita took over the administration of the scheme from a company called MyCSP in December 2025, saying it inherited a backlog of more than 86,000 cases. Despite a two-year transition period to prepare for the takeover, problems have persisted and by February the backlog had grown to 120,000 cases.…