A spokesperson for the said service levels following the move to had been "completely unacceptable", and that the department is holding back nearly £10m in payments and continuing to hold the company to account.
Capita took over administration of the Civil Service Pension 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, the problems persisted and by February the backlog had grown to 120,000 cases. The scheme manages the pensions of 1.7 million public sector workers.
Retired civil servants and bereaved families have been left waiting months for pension payments, with some struggling to pay bills. According to figures up to 30 September, 1,643 outstanding cases of bereavement or death in service are more than 100 days old, and only 301 of those are in scope to be paid within 15 days.
Under HMRC rules, a pension lump sum death benefit is tax-free only if the person died before the age of 75, the payment is made within two years of the pension scheme first becoming aware of the death, and the value is below the deceased's Lump Sum and Death Benefit Allowance. Otherwise the payment is taxed at the same rate as the beneficiary's income tax.
Sir Geoffrey Clifton-Brown, the Conservative MP who chairs Parliament's Public Accounts Committee, has written to Cabinet Office Minister Louise Haigh urging the government to confirm that affected bereaved families will not face this "unjust financial penalty". He said it was "unconscionable" that some families could face a "death tax" through no fault of their own, and that the likelihood of death benefit payments being made within two years was slim.
The Cabinet Office spokesperson said that if delays cause a tax charge, existing avenues for complaints can provide financial redress or compensation to cover losses, such as the Pensions Ombudsman. The ombudsman is currently advising that standard complaints are only likely to be resolved within 18 months, with more complex cases facing a longer wait.
Rob Wassell, 58, has been waiting almost two years for the lump sum from his brother's civil service pension following his death. He said that on 22 October it will be two years since the scheme was notified of the death, so the payment could be taxed if it does not arrive within days. "It's a bitter pill to swallow to have to pay tax for something which was not my fault," he said, adding that he needs the money to cover estate costs and fill a £20,000 hole in his savings.
Fran Heathcote, head of the , which represents civil servants, said it would be "a profound injustice" if families faced a further financial penalty because of Capita's failures, and that the government "should be ashamed" if that happened. The union said that while not all the cases would ultimately be affected by the two-year tax rule, there were "serious questions" over how long they would remain unresolved.
A Capita spokesperson said: "We are deeply sorry for the frustration that the administration of the Civil Service Pension Scheme has caused members and their families." The company said its teams are working to resolve outstanding cases as quickly as possible, with particular focus on people who have been waiting the longest and those facing financial hardship or challenging personal circumstances.