Government Moves to In-Source Civil Service Pensions
The UK government has confirmed plans to bring the civil service pension scheme back in-house following a series of service failures under the private contractor Capita. The Cabinet Office announced the decision after the company repeatedly missed critical recovery targets and failed to meet an end-of-June deadline to improve performance.
According to a Cabinet Office spokesperson, the service levels provided by Capita have been deemed completely unacceptable
to both taxpayers and scheme members. Cabinet Office minister Nick Thomas-Symonds stated that the government is now drawing a line in the sand
and intends to apply robust commercial levers, including the withholding of payments, while pursuing the recovery of costs from the firm.
Systemic Delays and Financial Hardship
The pension scheme, which serves 1.7 million members, has been plagued by administrative chaos since Capita took over operations in December. Official data from the Cabinet Office indicates that thousands of beneficiaries remain in limbo. Approximately 6,700 retired individuals are currently waiting for pension quotations, and there are roughly 7,600 outstanding bereavement cases affecting families of deceased claimants.
The impact on individuals has been severe. Multiple members reported being unable to afford rent or forced to rely on food banks due to the lack of income. Among those affected are elderly retirees and widows who have faced months of uncertainty regarding death-in-service benefits and retirement payments.
Capita chief executive Adolfo Hernandez issued a public apology during a parliamentary committee hearing, acknowledging the very poor service
delivered during a challenging time for beneficiaries. The company has warned of a potential £40 million hit to its 2026 earnings as a result of the contract failures. Following the news, shares in the company fell 18% in a single day, reaching their lowest point in a year.
A Troubled Transition
The contract, valued at £239 million, has faced scrutiny since its inception. Capita assumed responsibility for the scheme from MyCSP—part of Equiniti—and reported inheriting a backlog of 86,000 cases. Capita stated that this figure grew to 120,000 within months, though MyCSP disputed the nature of the inherited backlog, claiming only 36,000 cases were related to service levels.
Parliament’s public accounts committee had previously warned that Capita was ill-equipped for the scale of the task, noting that the firm had already been stripped of contracts for Teachers’ Pensions and the Royal Mail statutory pension scheme due to similar performance issues. Despite these warnings, the government proceeded with the contract, expressing confidence in January that Capita would deliver improvements.
Emergency Measures and Future Oversight
In response to the mounting crisis, the government has deployed a 140-strong team of civil servants to assist in clearing the backlog. Additionally, a Cabinet Office recovery taskforce,
established in January and led by HMRC deputy chief executive Angela MacDonald, has begun auditing the company’s systems. The government is also mandating that Capita fund a remedial adviser to oversee service improvements.
As the government prepares to transition the scheme back to internal management, oversight is expected to shift under new leadership. Richard Vianello is set to take over as the new pensions director following the retirement of Angela MacDonald. During recent parliamentary proceedings, members of the Public Accounts Committee questioned the government’s reliance on the firm, with some MPs characterizing Capita’s approach to government contracts as that of a “cash cow.”
For further details regarding the ongoing developments and the impact on scheme members, see reports from Theguardian, Consultancy, and the BBC.
