Civil Service blows £239m of taxpayers' cash on ‘failed' pension administrator
Taxpayers will foot a £239m bill for a new civil servants' pension scheme administrator despite the company's 'failing' track record, its critics have said.
Outsourcing giant Capita will run the Civil Service Pension Scheme from December, which involves handling £7bn in pension contributions and making payments of almost £8bn a year to retirees.
However, the Cabinet Office has already withheld almost £10m in contractual payments after the company missed vital deadlines while taking over from the scheme's current administrators, a National Audit Office (NAO) report said.
Capita previously administered the Teachers' Pension Scheme for 27 years, but Government officials opted to switch to a new provider in 2023 amid a string of delays.
Earlier this year it emerged teachers had been left waiting months for pension payouts, while some were unable to file for divorce due to administrative failures.
Capita said at the time that it was experiencing delays in calculating cash equivalent transfer values, which provide a cash value for the pension someone has built up and are often requested by people transferring it elsewhere or getting divorced. The provider is now facing legal action over the backlog.
There are 1.7 million members of the Civil Service Pension Scheme, which has almost £189bn in pension liabilities.
Six missed milestones already
The seven-year contract was awarded in November 2023 and Capita will take over running the scheme from December. The terms include a two-year transition from the current administrator MyCSP.
However, MPs said Capita had already missed three of its six milestones during the transition period, and the Cabinet Office subsequently withheld £9.6m in payments.
In its role, Capita will be required to maintain members' records, calculate and pay pensions, manage contributions and deal with queries from members and employers.
The outsourcing giant will now operate a simplified IT solution to avoid further delays, reducing the service offered to both scheme members and employers until at least March 2026, the NAO said.
Capita previously spent 27 years running the Teachers' Pension Scheme, beginning in 1996. It received multiple renewals that cost taxpayers more than £170m, but the Department for Education handed the new 10-year £223m contract to Indian IT company Tata in June 2023.
Last year Capita also lost its £107m contract for managing SATs tests.
'Track record of losing contracts'
Shimeon Lee, of the TaxPayers' Alliance said: 'It's hard to believe that such a massive pension scheme has been handed to a company with a track record of losing contracts.
'While Civil Service pensions do desperately need reform, it's vital that the system itself is robust and efficient. The Cabinet Office must get tougher on poor performance and handing taxpayers' cash to failing contractors who can't deliver.'
A Capita spokesperson said: 'Capita is proud to be working in partnership with the Cabinet Office to modernise the administration of the Civil Service Pension Scheme from December 2025.
'While the NAO report reflects the status of our transition to scheme administrator in May, we have since met the referenced milestones and are on track to deliver enhanced, innovative services for members for when the contract commences.
'We remain committed to offering seamless, tailored experiences to all Civil Service Pension Scheme members.'
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