Sir Geoffrey Clifton-Brown: "Unconscionable" that the families of loyal and dedicated civil servants could potentially face such an unjust financial penalty. Photo: ©House of Commons
The chair of the influential House of Commons Public Accounts Committee has called on the government to urgently clarify its position on Civil Service Pension Scheme (CSPS) death benefit payment rules amid “chaos” at the scheme.
In a letter to first secretary of state and minister for the Cabinet Office Louise Haigh sent this week, Sir Geoffrey Clifton-Brown said it was with "disbelief" he learned the pension benefit payments for families of deceased civil servants could be taxed due to administrative delays at the scheme.
Under current rules, where a person dies under the age of 75, their heirs generally receive lump sums and other payments free of income tax as long as these lump sums are paid within two years of the notification of the death. If payment takes longer than this, income tax must be paid at the recipient's marginal tax rate.
In his letter, Clifton-Brown said the "chaos" currently engulfing the CSPS meant the likelihood of death benefit payments being made within two years was "slim" – adding there would be "a significant number of beneficiaries" watching the clock quickly tick down to a year, as the "maladministration of the scheme enters its tenth month".
And he called on the government to clarify the position on this matter – confirming that such a death tax will not be levied on affected families.
He said: "It is unconscionable that the families of loyal and dedicated civil servants, who are continuing to suffer through this serious government failing, could potentially face such an unjust financial penalty. Their partners, sons, daughters, siblings and friends deserve so much better. This is an additional stress that they should not have to bear."
LCP partner and former pensions minister Steve Webb threw his weight behind the call for protection for families facing this situation.
Webb said: "Bereaved families are already dealing with the loss of a loved one, compounded by the hassle of chasing the CSPS for money which they are due.
"It would truly add insult to injury if lengthy delays in paying out the money, where these are due solely to administrative problems, meant that they face a big tax bill as well. The government must urgently confirm that in this situation such families would not be charged income tax."
In a statement, a Cabinet Office spokesperson said: "The service levels following the move to Capita have been completely unacceptable and we are committed to ensuring no member is left financially worse off.
"We are continuing to hold Capita to account, including holding back nearly £10m in payments, and are doing everything in our power to ensure that individuals do not experience delays. If delays cause a tax charge, existing avenues for complaints can provide financial redress or compensation to cover losses."
