Government Admits Retired Civil Servants Failed by Capita Pension Outsourcing Amid Up to Year Long Payment Delays

The Cabinet Office has acknowledged that the decision to outsource the civil service pension scheme has resulted in significant failures, with maladministration leaving some retired civil servants waiting up to a year for payments. The scheme, operated by Capita since December, has generated substantial hardship amongst beneficiaries.

Multiple members of the civil service pension scheme have reported severe financial difficulties, including an inability to pay rent and reliance on food banks due to prolonged income disruption. An estimated 17,000 relatives of deceased scheme members are also experiencing financial hardship as operational chaos at the scheme continues to delay payments.

The Cabinet Office has confirmed its intention to bring the scheme back in-house following what it describes as “unacceptable” service levels. Initial concerns were raised in December of the previous year, with Members of Parliament repeatedly cautioning that Capita was ill-equipped to manage the scale of the undertaking, particularly given the existing backlog of cases inherited from the previous administrator.

Among those affected are a 98-year-old woman who applied to the scheme following her husband’s death last December. According to her son, Nick Hitch, establishing the required application forms and submitting information in an acceptable format took three months. With savings nearly depleted, he and his brother face the prospect of providing financial support within weeks. The claimant subsequently began receiving payments, including arrears, after media intervention.

Sarah Colhill has been compelled to claim universal credit owing to delays in processing the £86,000 lump sum death-in-service benefit due after her 57-year-old husband died last October. As sole carer for her disabled daughter, she subsists on her late husband’s pension of £110 monthly. Nine months following his death, Capita demanded a letter of administration despite already paying her husband’s pension and having previously confirmed receipt of all necessary documentation. She can no longer afford her rent as a direct consequence of these delays.

Capita secured the £239 million contract from the Cabinet Office despite having been stripped of contracts to administer Teachers’ Pensions and the Royal Mail statutory pension scheme due to delays and backlogs. A report from Parliament’s Public Accounts Committee recommended that the government bring the scheme back in-house, noting that Capita had missed key milestones during the two-year handover period. The committee also criticised the government for failing to intervene when service standards deteriorated under the previous administrator, Equiniti.

The government stated that Capita had utilised the transition period to improve technology and staffing levels, proceeding with the contract regardless. In January, the Cabinet Office expressed confidence that Capita would deliver an enhanced service for pensioners and taxpayers. Six months later, it has conceded that the company repeatedly missed performance improvement targets.

Earlier this month, Cabinet Office Minister Nick Thomas-Symonds informed Parliament that the scheme could be a “prime candidate for insourcing in the future”. A Cabinet Office spokesperson confirmed the development, stating that Capita had failed to meet the critical end-of-June deadline to achieve agreed service standards, repeatedly missing recovery targets and delivering a service completely unacceptable to both members and taxpayers.

The statement continued that whilst the government will continue to apply robust commercial levers, including withholding payments to hold Capita to account, it is looking beyond short-term fixes. The government has set out its intention to advance what it describes as the biggest wave of insourcing in a generation, and is actively shaping a long-term strategy to return the pension scheme to in-house management.

The Public and Commercial Services Union has stated that the maladministration has caused financial and emotional hardship to thousands. General Secretary Fran Heathcote remarked that Capita has missed deadline after deadline, yet civil servants and pension scheme members continue to pay the price for those failures. She emphasised that behind every delayed case is a real person dealing with uncertainty, stress and financial worry.

Sally McEnhill and Christine Chalker lost their husbands last November and immediately submitted claims for their pension entitlements. Five months later, both were still awaiting confirmation of their entitlements. Chalker reported being told repeatedly that delays were due to data migration, only to discover weeks later that no forms had been received despite previous assurances that all information was in the system. She sent new forms but received no acknowledgement or update.

Chalker stated that losing a partner is one of the most difficult experiences anyone can endure, and the lack of clarity, communication and basic administrative handling from the civil service pension scheme has made it considerably worse. McEnhill began receiving her pension, worth £2,500 monthly, following media intervention; however, Chalker remained without an update two months later.

Capita declined to comment on individual cases but confirmed it had inherited a backlog of 90,000 cases from Equiniti and is working at pace to resolve them. A spokesperson acknowledged that the service has not been good enough, particularly for members awaiting bereavement, retirement and quotation cases, and expressed regret for the distress and inconvenience experienced. The company stated it now has the processes, automation and technology in place to work through the backlog.