Sally Jameson: Determined to ensure families are treated fairly and supported properly. Photo: ©House of Commons/Laurie Noble
Beneficiaries will not be left out of pocket should Civil Service Pension Scheme (CSPS) delays lead to avoidable death benefit tax charges, Cabinet Office minister Sally Jameson has confirmed.
Earlier this month, the chair of the influential House of Commons Public Accounts Committee 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.
Clifton brown said the "chaos" currently engulfing the CSPS meant the likelihood of death benefit payments being made within two years was "slim".
In her response to Clifton-Brown's letter, Sally Jameson agreed it was unacceptable for bereaved families to experience additional distress or uncertainty during an already painful time – saying she was determined to ensure these families "are treated fairly and supported properly".
Despite this, she said neither the Cabinet Office nor the scheme administrator has statutory discretion under tax law to alter or waive these tax charges.
However, she added: "Where administrative delays by the scheme lead to an avoidable tax charge, beneficiaries will not be left out of pocket."
Jameson said the CSPS is committed to handling any claims as quickly as possible, with the overarching aim of ensuring beneficiaries suffer no financial detriment.
In her letter, Jameson also said the Cabinet Office was working with Capita to ensure that the oldest outstanding cases are prioritised and resolved first – a move designed to clear aged cases and prevent any individuals from reaching the two-year threshold as a result of administrative delays.
She added that, while scheme data indicates that the number of individuals potentially impacted or approaching this threshold remains small and was currently fewer than 10, every case was being treated with urgency, adding that, where a delay directly causes a tax charge to arise, the scheme will ensure compensation is processed swiftly.
Jameson also said that HM Treasury was "fully aware of this issue and the ongoing work to resolve these cases".
