The government has announced loans of up to £20,000 for those affected by 'abysmal' delays in the Civil Service Pension Scheme (CSPS), which has left tens of thousands of people waiting for payments. Around 150,000 cases across the UK are experiencing problems, with some bereaved families plunged into financial difficulty.
The scheme, which has roughly 1.7 million members, has been operated by Capita since 1 December last year. The government has described the issues surrounding its management as 'entirely unacceptable'. Grieving families and retired civil servants from organisations including HMRC and DWP have endured months of waiting for pension payments.
Five measures to address the backlog
According to one report, about 1,800 complex pension cases have been left unresolved for over a year. The BBC highlighted the case of Rob Wassell, who waited more than two years after his brother's death before receiving the lump sum from his civil service pension.
The Cabinet Office has released a new Parliamentary statement outlining five measures to address immediate financial issues among those affected by the backlogs. These are: interest on benefits paid late, work to speed up exceptional cases, the deployment of more than 140 staff to tackle backlogs, loans of up to £20,000, and lump sum payments to provide immediate funds.
The Pensions Age website reports there were 150,000 outstanding administration cases as of 5 October.
Minister's statement and support measures
Sally Jameson, Parliamentary Secretary and Parliamentary Under-Secretary of State at the Cabinet Office, said the government was taking 'direct action' to support those in financial hardship. She said particular focus was being placed on high-impact and vulnerable cases - specifically bereavement, death-in-service, and ill-health retirement awards - with the aim of clearing 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."
The CSPS is also introducing 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." Members do not need to apply.
Holding Capita to account
The minister said that all outstanding ill-health retirement and death-in-service cases have been placed under closer scrutiny to process them more swiftly. More than 140 civil servants alongside other specialists have been deployed to 'bypass standard queues' and 'directly clear the oldest and most complex cases'.
Cases involving exceptional circumstances are also being assessed for prioritisation on a case-by-case basis. The Cabinet Office has established dedicated "virtual surgeries" for MPs and caseworkers, designed to fast-track urgent and exceptional cases directly with a Capita caseworker.
Her response followed 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 pointed the finger at the previous government for awarding the contract in November 2023. In her reply to Mr McDonnell, she said: "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."
She added: "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 told Mr McDonnell that independent auditors had been sent in to conduct a review and confirmed that Parliament would be updated shortly. She revealed that efforts were under way to bring the pension scheme "back in-house".
Addressing 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 issued 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 also said: "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." Regular updates on the recovery efforts continue to be posted on the Civil Service Pensions member portal and on GOV.UK.
Budget change for bereaved families
The news comes alongside a change announced at Chancellor John Healey's first Budget affecting those on the scheme. It was confirmed last Wednesday that bereaved families would no longer face a tax bill as a result of lengthy delays in CSPS payouts.
Previous rules meant that certain lump sum pension payments had to be made within two years of the CSPS being notified of a death in order to remain tax-free. Announcing the change, 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."
Mr Wassell's case and others that pre-date October 28 are unaffected by the new ruling. He told the BBC the process had been an "ordeal". To lodge a complaint with the CSPS, visit the relevant page on their website.
