The Scheme is very sorry for the delays in setting up your retirement benefits and acknowledges that the process has taken longer than it should have.
In recognition of the current delays in setting up and paying your retirement benefits, the Scheme has put in place a temporary process to apply interest when the full benefits are paid more than one month after your retirement date.
This applies for retirement payments paid by Capita from 1 December 2025. You will not receive interest on retirement payments which were paid prior to 1 December 2025.
What interest rate will be used?
The interest rate that will be applied will be based on the Bank of England base rate plus 1%, for the period of the delay between your retirement date and the date when your full benefits are paid.
When will the interest payment be calculated and paid?
The priority for the Scheme is ensuring that your normal monthly pension is set up as quickly as possible, with any arrears payment due, plus a lump sum if you have selected this option – the interest will be calculated once this has happened.
We will write to you again to confirm how much interest will be paid to you, when it will be paid and some information on the taxation of the interest payment – the Scheme plan to commence processing interest payments from April 2026.
Will the interest payment be taxed?
In the vast majority of cases, no income tax will be deducted from the interest payment before making payment to you. However, tax may still be payable on it depending on any other income and interest that you may have received during the tax year to which the interest relates. If you are required to submit a Self-Assessment tax return, then you must include details of this interest payment on it. You can check whether you need to submit a Self-Assessment tax return on the Government’s website: https://www.gov.uk/check-if-you-need-tax-return.
Even if you do not complete a Self-Assessment tax return, if this interest together with any savings income received in respect of interest paid on your UK banks and building societies, exceeds your Personal Savings Allowance, then you need to contact HMRC to let them know about the payment. Further information about the Personal Savings Allowance can be found here: https://www.gov.uk/apply-tax-free-interest-on-savings.
If you live outside the United Kingdom, the Scheme must deduct tax at source at the basic rate.
How long will the Scheme apply interest for late payment of retirement payments?
The Scheme Manager, the Cabinet Office, will keep this under review, and this web page will be updated accordingly.
Do I need to contact the Scheme about the interest payment?
No, as noted, we will write to you again to confirm when the interest payment will be paid to you.
