// BBC BUSINESS NEWS — FINANZA
Bereaved families will not face tax bill over pension delays under new rules
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.
Retired civil servants and bereaved families have been left waiting months for pension payments, with some struggling to pay bills.
According to the latest figures up to 30 September, external, 1,643 outstanding cases of bereavement or death in service are more than 100 days old.
The Cabinet Office, which has overall responsibility for the Civil Service Pension Scheme, previously said only a small number of these cases were approaching the two-year threshold.