The government has announced that people can get loans of up to £20,000 as tens of thousands encounter 'abysmal' delays in a major pension scheme. About 150,000 cases nationwide are experiencing difficulties, with many people facing long delays in receiving pension payments - pushing some bereaved families into financial hardship.
The government has now issued an update on the Civil Service Pension Scheme (CSPS), which has roughly 1.7 million members, saying the issues around its administration are 'entirely unacceptable'. Bereaved families and retired civil servants from organisations including HMRC and DWP have endured months waiting for pension payments, with failures in the scheme leaving some people struggling to settle their bills.
Scope of the backlog
Around 1,800 complicated pension cases have remained unresolved for over a year, according to one report. The BBC also revealed last week the case of one man, Rob Wassell, who waited more than two years following his brother's death before receiving the lump sum from his civil service pension.
The Cabinet Office has now published a new Parliamentary statement on the scheme amid mounting calls to distribute interim payments, with many members experiencing delays over payments, quotations and responses to enquiries. The scheme has been administered by Capita since 1 December last year, but has faced severe criticism from the government over a backlog of cases.
The Pensions Age website reports there were 150,000 outstanding administration cases as of 5 October. In its update, the government outlined five measures now being taken to address immediate financial issues among those affected by the backlogs, reports the Mirror.
Government measures and support
These are:
- loans of up to £20,000
- the deployment of more than 140 staff to tackle backlogs
- interest on benefits paid late
- work to speed up exceptional cases
- lump sum payments to provide immediate funds
In a statement, Sally Jameson, Parliamentary Secretary and Parliamentary Under-Secretary of State at the Cabinet Office, said the government was taking 'direct action' to support those experiencing financial difficulty. She said particular attention was being directed towards high-impact and vulnerable cases - specifically bereavement, death-in-service, and ill-health retirement awards - with the objective of eliminating the backlog.
She said: "To provide immediate financial support to those who may need it, including those who have left under the compensation scheme, arrangements are in place for interest-free bridging loans of £5,000 and up to £20,000 in exceptional cases - to most recent retirees facing payment delays. This is alongside interim lump sum payments being made to provide immediate funds to retiring members."
She also said that the CSPS is implementing a temporary process to pay interest on benefits paid more than one month after a member's retirement date. She said: "This applies for those who receive retirement payments after 1 December 2025, and interest will be calculated at the Bank of England base rate plus 1%. Capita will automatically calculate the interest owed."
Capita's role and accountability
Members do not need to apply. The minister stated that all outstanding ill-health retirement and death-in-service cases have been subjected to extra scrutiny to speed up their processing. More than 140 civil servants alongside other specialists have been assigned to 'bypass standard queues' and 'directly clear the oldest and most complex cases'.
The minister indicated that cases involving exceptional circumstances are also being checked for prioritisation on an individual basis. And she revealed the Cabinet Office has introduced dedicated "virtual surgeries" for MPs and caseworkers, intended to accelerate urgent and exceptional cases directly with a Capita caseworker.
Her statement came after former shadow chancellor John McDonnell's question to the Cabinet Office to see "if it will commit to an urgent, accessible hardship escalation process for affected members of the Civil Service Pension Scheme, including interim payments and loans where appropriate, with clear ownership and timescales."
Ms Jameson blamed the previous government for granting the contract in November 2023 - and has recently described Capita's attempts to address the backlogs as 'abysmal'. In her response to Mr McDonnell, she stated: "The current delays facing scheme members are entirely unacceptable, and the Government continues to hold Capita to account for delivery of the service, applying all contractual levers. This includes withholding £9.9 million in contract payments for undelivered milestones."
"We intend to seek to recover all the Government's delay-related costs, and that Capita bear the costs of their failure, not the taxpayer. Ministers have been clear that Capita's performance has fallen short of acceptable standards, which is why urgent intervention has been taken; including mandating production of a formal service rectification plan."
She informed Mr McDonnell that independent auditors had been deployed to undertake a review and confirmed that Parliament would receive an update imminently. She said work was progressing to bring the pension scheme "back in-house".
Speaking about the delays in Pensions Age last week, Civil Service Pensions director Richard Vianello said: "I remain deeply sorry that performance is not where it should be, and for the impact this is having on so many of you."
Capita released a statement last week expressing that it was "deeply sorry for the frustration that the administration of the Civil Service Pension Scheme has caused members and their families". It added: "We know that behind every outstanding case is a person waiting for the pension they have worked for and are entitled to receive, or a family trying to get support at an already incredibly difficult time."
Updates on the recovery initiatives are being published on the Civil Service Pensions member portal and on GOV.UK.
Budget change for bereaved families
The announcement arrives alongside a change revealed at Chancellor John Healey's inaugural Budget for some of those enrolled in the scheme. It was disclosed last Wednesday that grieving families would no longer face a tax demand as a consequence of the delays in CSPS payments.
Earlier rules said that particular lump sum pension payments had to be processed within two years of the CSPS being informed of a death in order to stay tax-free. But critics said this was unjust to the many experiencing prolonged delays that were completely outside their control.
Announcing the reform, pensions minister Torsten Bell said: "The Government has removed the two-year deadline for pension and lump sum death benefits to be paid tax-free where the member died before age 75. Under the change, payments made on or after 28 October 2026 will no longer become taxable solely because more than two years have passed since the pension scheme first knew, or could reasonably have been expected to know, of the member's death."
"The existing requirements relating to the deceased member's age and availability of Lump Sum and Death Benefit Allowance will continue to apply. The change will apply to payments made from 28 October 2026, including payments relating to deaths that occurred before that date. It will therefore protect beneficiaries awaiting payment when the change takes effect."
Mr Wassell's case and others predating 28th October remain unaffected by the new ruling. He described the process to the BBC as an "ordeal". To submit a complaint to the CSPS, visit the relevant page on their website.
