Restoring the Civil Service Pension Scheme to “normal” service levels is likely to take another “few months”, MPs have been warned as further details of issues faced by administrator Capita emerge.
Cabinet Office minister Nick Thomas-Symonds gave the recovery estimate to a joint session of parliament’s Public Accounts Committee and Public Administration and Constitutional Affairs Committee yesterday.
MPs also heard that after two missed deadlines for returning to “normal”, there is currently twice as much casework ongoing in CSPS than would be expected in a scheme of its size.
On Monday, Thomas-Symonds announced a package of enforcement measures following Capita’s failure to meet its end-of-June deadline for restoring service levels. Yesterday, he acknowledged that significantly more time will be needed.
“Over the next few months our focus is on exerting robust operational and commercial pressure to clear the remaining backlogs and recover the service,” he said. “But for the longer term, I do think the episode has vividly exposed the severe limitations of outsourcing the Civil Service Pension Scheme.”
Angela MacDonald, who is currently leading the Cabinet Office’s Pensions Taskforce, told the session that as of 30 June, Capita had 111,700 “pieces of work sat inside the scheme”.
The firm inherited a 90,000-strong casework backlog from previous administrator MyCSP when it took on the scheme in December last year. In recent months thousands of retired civil servants – and relatives of officials who died in service – have faced delays in receiving payments.
MacDonald told MPs that the current backlog of scheme-related work was “double where we should be”. She said a normal head of work in a scheme like the CSPS would be about 55,000.
Cabinet Office permanent secretary Cat Little was asked for her estimation of a “reasonable timescale” for returning the CSPS normal operating levels.
“I have asked Capita to provide us with a fully confident rectification plan which has detailed assumptions and asks the very simple question: Why is it going to be different and believable this time?” she replied. “They are going to provide us with that detailed plan on 14 July.”
Little said her understanding is that the firm will commit to returning some categories of CSPS related work to “normal service levels” by 1 September, with “more complex cases” following in October.
“We have got to take the rectification plan that Capita give to us and we are going to have to assure every single detail and assumption in it, to stress test whether or not we’ve got confidence in it,” she said. “That is exactly why the minister has asked us to bring in independent auditors as well, so that we can actually look at the underlying systems and assumptions that are driving that plan.”
Little told MPs that Capita is expected to miss 16 of the 21 key performance measures for the CSPS administration contract this month. The KPIs it is expected to meet are understood to relate to “ongoing payroll”.
Failure to deliver on tech commitments
Little told MPs she has confidence in Capita’s transparency, but not in the quality of its data and management information related to the scheme.
“We have to do a lot of work with Capita to make sure we have confidence and assurance in the information that we are being given,” she said.
The perm sec said that as part of its contract Capita was supposed to have delivered a system with Microsoft business analytics platform Power BI self service and enabled with machine intelligence “from day one” but that had not materialised.
“So there are lags in the data that we need and the quality of what we’re getting still needs significant assurance,” she said. “We were given very, very strong assurances that this technology would be available by now. It became very clear post-transition that that was not going to happen within the timescales that we were given assurances about.”
Little told MPs that the Cabinet Office is still waiting for “a good, confident technology rectification plan that we have confidence in” from Capita.
“Which is exactly why we’re having to bring in a remedial adviser to give advice on why this hasn’t been delivered and what confidence we have that it can be,” she said.
Capita's ‘reputational hit’ from CSPS failings
MPs also heard from senior officials at Capita yesterday afternoon, when group chief executive Adolfo Hernandez acknowledged the firm’s failings related to the CSPS are “having a very negative impact on our reputation”.
His words were borne out in a trading update issued by the firm this morning, which predicted that additional expenses related to its work on the £239m CSPS contract could hit 2026 profits by up to £40m.
“Efforts to restore service levels on this contract mean that the Pension Solutions division will incur a number of additional costs in 2026,” the statement said. “This includes surge resource costs and remediation costs on [the] Civil Service Pension Scheme contract and the likely impact from costs against KPI performance.”
Paymaster general Thomas-Symonds confirmed on Monday that £9.9m has already been withheld from Capita over the flawed administration transfer. He was also adamant that “every single penny”of the government’s “surge” costs would be clawed back from the firm.
Yesterday, government chief commercial officer Andrew Forzani told MPs that the £9.9m figure relates only to Capita “failing the transition” and that penalites for the firm’s failure to meet monthly KPIs will come on top.
“We have been deducting monies every single month for failed service delivery,” he said. “We haven’t declared those numbers because we are in dispute with Capita about [them].”
Forzani said one of the purposes of bringing in independent auditors was to reach agreement on the data.
Capita has increased the number of staff deployed on the CSPS contract as part of its efforts to deal with the crisis, but a further financial battlefield will be costs related to the Cabinet Office’s deployment of additional civil service staff.
Angela MacDonald told MPs yesterday that the cost of her Pensions Taskforce, which includes 140 “surge” civil servants, will be £12.5m for 2026-27.
Capita has pledged to cover the cost of the taskforce from May, but not from when it went live in February.
At yesterday’s session, Public Accounts Committee chair Sir Geoffrey Clifton-Brown pressed Capita CEO Hernandez to commit to covering the entirety of the government’s surge costs.
Hernandez replied: “There are a number of variables here. There’s a lot of decisions that need to be made. There is no isolated decisions. There are decisions that pertain to this particular investment. There are decisions about others. I think we need to have a commercial discussion [and] put them all together.”
Hernandez said he had heard the various calls for Capita to pay the surge cost, but suggested that it would be a matter for future negotiation.
“When we sit around the table, this will be taken favourably,” he said. “But we haven’t sat around the table. It would be a little bit irresponsible for me to make a commitment.”
Clifton-Brown dismissed the response as “an appalling reply”.