Outsourcing giant Capita has been hit with financial penalties triggered by “unacceptable” service levels experienced by Civil Service Pension Scheme members over the past two months, the Cabinet Office has confirmed.
Capita took over administration of the pension scheme – which has around 1.7 million members – in December, pledging improved service for both current and retired civil servants.
However, in the weeks since the transfer the so-called “work in progress” backlog has hit 120,000 cases – up from 86,000 at the beginning of December. The 86,000 figure was more than double the number Capita said it was expecting to inherit from previous scheme administrator MyCSP.
Civil service unions and the Cabinet Office itself have described the current situation as “unacceptable”. The Cabinet Office, which has responsibility for the CSPS, last month set up a taskforce to help deal with the scheme’s service issues, headed by HM Revenue and Customs second permanent sec Angela MacDonald. A “surge team” of 150 government officials has been drafted in to assist with the work.
On Friday, Cabinet Office minister Anna Turley confirmed that Capita has been hit with penalties because of its performance in the very first month that the £239m CSPS contract went live.
In answer to a parliamentary question she said: “The contract includes key performance indicators that, if not met, include financial penalties. These have already been applied in respect of Capita’s performance in December.”
Turley did not specify the value of penalties Capita has incurred. Civil Service World sought clarification from the Cabinet Office but it had not responded at the time of publication.
A major criticism of the Cabinet Office’s contract with MyCSP was the lack of effective levers to address poor performance. A National Audit Office report in June last year suggested that Capita’s contract included a strengthened accountability regime for key service levels featuring a “five-point severity scale” that attracted different levels of potential financial penalties.
As of June last year, the NAO reported that the Cabinet Office had already withheld payments of more than £9m because Capita had missed “milestones” related to the transfer arrangements for its CSPS contract.
CSW also sought a response from Capita. It had not provided one at the time of publication.
Thousands waiting for payments
According to an update given to MPs by Cabinet Office permanent secretary Cat Little last week, the backlog of CSPS casework includes around 8,500 scheme members who have already retired from the civil service but who are yet to receive their full pension entitlement.
Some 6,300 cases relate to scheme members who have died. Little said that while some of those cases will not require significant further action, others would involve payments of benefits for dependents, such as lump-sums, or the creation of spouse pensions. Little said Capita estimated that around 75% of the backlog relating to scheme members who have died had been inherited from MyCSP – meaning that roughly 1,500 cases were new since December. Of those, approximately 300 cases involve officials who died ahead of their scheduled retirement.
A further 3,400 cases that make up the backlog relate to civil servants who are due to leave their jobs via voluntary exit schemes, for which paperwork and in some cases payments will be required by the end of next month. Little’s letter to the Public Accounts Committee last week said that Capita is currently unable to guarantee that all paperwork related to the voluntary exits will be completed by the deadline.
Hardship help
At the end of last month, the Cabinet Office and Capita announced they were working together on the creation of a “hardship fund” to help CSPS members who are suffering financially because of the casework backlogs.
In her letter to the PAC, Little confirmed that interest-free loans of up to £10,000 would be made available to departmental staff who have retired within the last 12 months but are yet to receive CSPS payments. The loans are being made available by departments and agencies.
“Loans should be repaid once pension payments commence, and we will develop standard recovery principles,” she said. “The Treasury considers that such payments in line with this approach should not be novel, contentious and/or repercussive.”
Little said work is ongoing with Capita on ways to help people who retired more than 12 months ago but who have yet to receive their full entitlement – or for the dependents of scheme members who have died. They are excluded from the civil service-led hardship loans offer.
“Capita will prioritise these cases and where they are unable to fully process their benefits immediately, they will make a partial pension payment in the interim period to relieve hardship,” Little said.
Answers sought on bringing CSPS ‘back in-house'
This week has also seen PAC chair Sir Geoffrey Clifton-Brown seek clarification from Little on the government’s stance in relation to bringing administration of the CSPS back in-house at the Cabinet Office.
A PAC report in late October questioned whether Capita was ready to assume the administration of the CSPS from the beginning of December. In the light of failings by MyCSP, it called on the Cabinet Office to “publicly take stock” of the costs and benefits of bringing the pension scheme back in-house.
The Cabinet Office rejected a recommendation to do that. Clifton-Brown has now written to Little, calling on her to explain why.
“The recommendation was not suggesting that pension administration should be brought in-house but was asking for confirmation that in-housing is an option that is considered, which your response clearly sets out that it is,” he said.
“Would you therefore clarify why you disagreed with this recommendation, and what action you are taking to address our concerns.”