According to the latest figures up to 30 September, external, 1,643 outstanding cases of bereavement or death in service are more than 100 days old.
Of these, only 301 are in scope to be paid within 15 days.
The PCS union, which represents civil servants, said that while not all these cases would ultimately be affected by the two-year tax rule, there were “serious questions” over how long they would remain unresolved.
The Cabinet Office said that while the number of individuals approaching the two-year threshold was currently fewer than 10, “we are treating every case with urgency”.
If someone dies before the age of 75, a pension lump sum death benefit is only tax-free if it is paid within two years of the pension scheme first becoming aware of the death, and if the value is below the deceased’s Lump Sum and Death Benefit Allowance.
The payment would be taxed at the same rate as the beneficiary’s income tax rate.
Sir Geoffrey has written to Cabinet Office Minister Louise Haigh to urge the government to confirm the bereaved families affected will not face this “unjust financial penalty”.
His letter came after BBC Radio 4’s Money Box Live highlighted the potential tax liability.
Sir Geoffrey said “the chaos currently engulfing the Civil Service Pension Scheme means that the likelihood of death benefit payments being made within two years is slim”.
He warned “a significant number” of family members “will be watching the clock quickly tick down to a year, as the maladministration of the scheme enters its tenth month”.
He added: “This is an additional stress they should not have to bear.”
Writing in response to Sir Geoffrey’s letter, Minister Sally Jameson said neither the Cabinet Office nor the pension scheme administrator had the power under tax law to alter or waive these tax charges.
However, she said where delays lead to an avoidable tax charge people “will not be left out of pocket” and the pension scheme “will ensure compensation is processed swiftly”.
She added that the Cabinet Office was working with Capita to ensure the oldest outstanding cases were prioritised.
