Bereaved families face unjust tax after Capita pension delays

The UK Civil Service Pension scheme has plunged into a severe crisis after outsourcing firm Capita took over its administration from MyCSP in December 2025, inheriting a staggering backlog of over 86,000 cases upon transition.

Despite a two-year transition period allocated to prepare for the takeover, operational problems have persisted and worsened. By February, the total backlog of cases had climbed to 120,000, leaving retired civil servants and grieving families waiting for months and occasionally struggling to pay their basic bills.

Under HMRC regulations, if a scheme member dies before reaching the age of 75, a pension lump sum death benefit is only exempt from tax if it is fully paid out within two years of the scheme becoming aware of the death. If payments miss this deadline, beneficiaries face taxation at their regular income tax rate.

Stock photo for illustration only, not from the actual event

This tight statutory window means families are now at risk of incurring an unjust tax penalty through no fault of their own. Rob Wassell, 58, has been waiting nearly two years for his late brother's pension lump sum. With the two-year deadline expiring on 22 October, any further delay could trigger a heavy tax bill on the funds he desperately needs to cover estate costs and personal financial shortfalls.