More than 700,000 retired civil servants could see their pension payments disrupted after a major government contract ran into trouble, unions have warned.
The £239million deal, which would hand control of the Civil Service pension scheme to consultancy firm Capita for the next decade, is now in doubt after the Cabinet Office failed to confirm whether the December handover will go ahead.
The Public and Commercial Services Union has warned that serious problems have emerged during the handover of the Civil Service pension scheme, raising fears of payment delays and service disruption across the £8 billion-a-year system.
With less than five weeks to go, MPs are also worried that Capita may not be ready to take over the contract.
The Cabinet Office has yet to confirm whether the transfer will still go ahead on December 1, following a troubled two-year transition that was meant to ensure a smooth handover from current administrators MyCSP.
Capita won the new £239million deal in November 2023, returning to manage the scheme after being removed from the same role in 2012.
The contract covers around £8billion in annual pension payments for 730,000 retired civil servants, along with £7billion in contributions.
Despite the looming deadline, officials say approval for the transfer is still pending.
The Cabinet Office has already withheld £9.6million in payments to Capita after the company failed to meet three key milestones during the transition.
Capita intends to operate with even fewer employees
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GETTYBy July, the consultancy had achieved only one of eight required targets, prompting Cat Little, the Cabinet Office’s permanent secretary, to suggest the firm had “probably underestimated” the project’s complexity.
A Capita spokesperson disputed recent assessments, stating: “This report presents a snapshot from several months ago and is not reflective of the current status of the transition.”
The Public Accounts Committee discovered that whilst MyCSP’s service standards have been inadequate since 2023 due to insufficient staffing, Capita intends to operate with even fewer employees.
PCS general secretary Fran Heathcote warned of “major potential issues” that could affect multiple aspects of the scheme’s operations.
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The union leader also expressed concerns about prolonged implementation of the McCloud pensions remedy judgement
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GETTYShe highlighted risks including disruptions to existing pension payments, delays for new retirees awaiting their first payments, and complications with processing redundancy and exit settlements.
The union leader also expressed concerns about prolonged implementation of the McCloud pensions remedy judgement and difficulties for members attempting to contact the service or use online portals.
“We resolutely believe that the only safe option for a pension scheme covering 1.7 million scheme members is to bring the physical administration of the work back in-house, under direct ministerial control,” Ms Heathcote stated.
Capita’s performance history raises additional concerns about its capability to manage the scheme. The company lost its Teachers’ Pension Scheme contract in 2023 after 27 years, following administrative failures that potentially reduced some teachers’ retirement funds by tens of thousands of pounds.
The agreement involves administering approximately £8billion in annual pension payments
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GETTYThe firm suffered a cyber attack in 2023 that compromised bank details and medical records, resulting in a £14million penalty from the Information Commissioner’s Office.
The PAC’s recent assessment concluded there was “a clear risk that Capita will not be ready to take over administration of the scheme as planned.”
The consultancy also forfeited a £107million SATs testing contract last year.