Question to the Cabinet Office:

To ask the Minister for the Cabinet Office, what steps he is taking to ensure that civil servants who have suffered financial hardship as a result of Capita's administration of the civil service pension scheme are fully compensated, and at whose expense.

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

The issues and delays facing a number of civil servants and pension scheme members in receiving their pension benefits are unacceptable. We want to reassure you that this Government has taken firm action to help put things right as soon as possible. We have agreed a clear recovery plan with Capita, which includes specific milestones and accountability targets for delivery. For priority cases, we have deployed additional resources and improved communication with affected colleagues, so that staff, both former and serving, receive the quality of service and support they deserve.

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.

To provide immediate financial support to those who may need it, including those who have left under the compensation scheme, arrangements are in place for interest-free bridging loans of £5,000 and up to £20,000 in exceptional cases - to most recent retirees facing payment delays. This is alongside interim lump sum payments being made to provide immediate funds to retiring members. The pension scheme continues to make monthly pension payments to approximately 730,000 existing pensioner members on time. It should be noted that these loans are provided by the employer and not the Cabinet Office. There is no provision in the contract for cost recovery from Capita as the loan will be fully repaid directly by the member on receipt of their pension payment.

To mitigate member hardship, employers have issued £16.2 million in Transitional Support Loans to 2,932 members and these arrangements continue to be in place.

Interest will be paid on delayed benefits to avoid financial loss by members. In addition, the existing statutory complaints process evaluates claims for financial losses, as well as distress and inconvenience caused, on a case-by-case basis to determine whether compensation is due. This ensures that any retiree who provides evidence of extra costs, such as bank penalties or interest charges caused by the delay, is fairly assessed. This process is run in accordance with the standards set by the Pensions Ombudsman.

Existing Key Performance Indicators (KPIs) have been enhanced and strengthened to deliver improved performance and higher penalties for failure, including financial penalties. These have already been applied in respect to Capita's performance falling short of expected standards and delays in administering the Civil Service Pension Scheme.

Capita were 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.

Capita has made lump sum payments to 19,362 members, the majority of whom have retired but are not yet receiving their pension.

Regular updates on the work to recover the service, continue to be posted on the Civil Service Pensions member portal and on Gov.Uk.