Question to the Cabinet Office:

To ask the Minister for the Cabinet Office, with reference to the Written Statement of 1 July 2026 on the Civil Service Pension Scheme, what commercial levers his Department is considering in response to Capita’s performance; and whether those levers include financial penalties, withholding payments, contract variation, termination or bringing administration of the scheme back in-house.

The Cabinet Office awarded Capita the contract to administer the Civil Service Pension Scheme in November 2023 under the previous government.

The current delays facing scheme members are entirely unacceptable, and this Government has taken firm action to resolve them through a clear recovery plan with strict delivery milestones. We have deployed additional resources to expedite priority cases, ensuring that serving and former staff receive the high standard of service they deserve. Regular progress updates remain available to members via the pension portal and GOV.UK.

While Capita committed to a complete return to standard contractual service levels by the end of June 2026, they have failed to meet this critical milestone. The Government is taking robust action to hold Capita to account. This includes withholding £9.9 million in contract payments for undelivered milestones, alongside confirmation that the Government surge team costs will be recovered directly from Capita.

To enforce strict compliance, independent auditors are being deployed to conduct a technical systems review, and an on-the-ground Remedial Adviser is being appointed at Capita’s expense. Further commercial, legal, and operational options remain on the table during the consideration of long-term structural delivery options.

Looking forward, the Government has already announced their new public interest test to end outsourcing of public services by default. From April 2027, all contracts over £1 million must be assessed for in-house viability before renewal. Departments exceeding £100 million in annual spend must also develop five-year insourcing strategies. This framework builds the exact long-term capability that we need, shifting our focus from short-term pricing to service quality and operational resilience.

The Cabinet Office is unable to provide a specific breakdown of the number of Civil Service Pension Scheme members who are awaiting payment beyond the expected timescale, as members retire at different times, including early, late, or partial retirement. Around 6,700 members currently await pension quotations from Capita, including outstanding historical cases left unprocessed by the previous administrator.

Capita were initially instructed to prioritise and clear the most urgent cases such as Death in Service and Ill-Health during February and March. While Capita previously assured us that performance standards for Death in Service and Ill-Health were being met by mid-March, recent information continues to demonstrate unacceptable delays in some ill-health retirement and death-in-service cases. We have urgently escalated this to Capita, who are actively investigating the underlying data and reasons for these continued delays.

As of 30 June, Ill-Health numbers outstanding are 429, of which 60 have outstanding data or information requirements before processing can be completed. In respect of Death in Service, numbers outstanding are 618, of which 400 have outstanding data or information requirements before processing can be completed.

Capita has issued lump sum payments to 19,362 retired members awaiting their regular pensions, whilst the scheme continues to pay approximately 730,000 existing pensioners on time. To alleviate immediate hardship, employers have issued £16.2 million in Transitional Support Loans to 2,932 members, alongside interest-free bridging loans ranging from £5,000 to £20,000. Members will fully repay these bridging loans upon receipt of their formal pension payments.

Existing civil servants who have partially retired or a civil servant who retired from 1 January 2025, can contact their employer to access the transitional support loan. The provision of these loans will continue while delays persist.

Pension scheme members not in scope of this loan scheme but who are at risk of experiencing financial hardship due to the delayed payment of their pension, should contact Capita and highlight the financial impact of these delays. Capita will then prioritise resolution of these cases.

The scheme will automatically pay interest on delayed benefits to protect members from financial loss. The statutory complaints process evaluates claims for financial loss, distress, and inconvenience on a case-by-case basis, to determine whether any compensation is due, and is operated in strict accordance with the standards set by the Pensions Ombudsman.