I want to provide the House with an important update on the administration of the civil service pension scheme. Capita was awarded this contract in November 2023. It had two years of transition to prepare, and its senior leadership gave me explicit personal assurances ahead of the handover that they were fully capable of managing the workload and that they were ready for a successful transition. Indeed, the chief executive promised that technological improvements would create a flagship use case for the largest AI-enabled pension scheme in the country. It is clear that non-delivery of technology has been a fundamental part of Capita’s inability to deliver. The reality is that it was completely unprepared and its system was overwhelmed, which resulted in a backlog that skyrocketed to a staggering 120,000 unresolved cases.
In response, I intervened immediately and established the Cabinet Office pensions recovery taskforce. Capita committed to two critical recovery targets: an end of April milestone to clear the inherited arrears, and an end of June milestone by which point it promised a complete return to standard contractually required levels. Capita missed its own April milestone. The end of June deadline has arrived, and I regret to inform the House that Capita has failed to meet that milestone, too. Seven months on from taking over operations, too many pension scheme members still face unacceptable delays after years of dedicated public service.
Since my last statement on this matter, thousands of quotations have been issued and pensions put into payment. Capita had committed to clearing the quotes backlog by today, but I am afraid that the reality remains very different. As of the end of June, there are still more than 6,700 quotations outstanding for past retirement dates, and more than 4,100 bereavement cases on which Capita could take action. These are the most harrowing stories, affecting devastated scheme members and grieving families. My officials have forcefully escalated those systemic back-office failures directly to Capita’s senior leadership, demanding an immediate investigation and resolution.
I have to be frank with the House: what progress has been achieved is due to the significant additional capability provided by the Cabinet Office pensions recovery taskforce, and a team of more than 140 officials whom I have “surged” into the process. Let me also say that public money will not fund Capita’s failings. We will recover every single penny of these surge costs directly from Capita, and I will not remove a single member of the team until the service is permanently fixed and fully restored.
Across core areas of pension payments, quotations and complaints, the operational reality remains deeply concerning, and although the speed of quote issuance has accelerated over the past month, it still leaves more than 6,700 outstanding quotes to be processed, as of the end of June, for past retirement dates.
I thank the Minister for advance sight of his statement. Nobody in this House should be in any doubt about the anxiety and hardship being felt by retired public servants and the grieving families left stranded by this operational collapse. We are talking about more than 6,700 outstanding pension quotations and more than 4,100 unresolved bereavement cases. These are not mere statistics; they represent vulnerable individuals who have been left facing severe financial distress.
Let us be completely clear about where responsibility for this ongoing execution failure lies. The Minister can look backwards to November 2023 all he likes, but the critical transition phase, the data quality integration and the system go-live occurred on this Government’s watch and, more specifically, on his watch. The timeline of unheeded warnings is damning. Throughout 2025, both the National Audit Office and the Public Accounts Committee explicitly flagged that Capita was missing critical transition milestones and IT delivery targets, yet despite these clear red flags, the Cabinet Office chose to override the warnings, accepted flawed assurances and pressed ahead with the December go-live. The contract management failure belongs entirely to those on the Government Front Bench.
Alarmingly, despite the establishment of the Minister’s flagship pensions recovery taskforce, the situation is deteriorating in key areas. The Minister has just admitted that the backlog of MP complaints has grown significantly under his watch, going from 1,500 to more than 1,900 outstanding constituent cases since the end of April—barely nine weeks ago—and it is getting worse. Worse still, instead of focusing purely on immediate operational rectification, the Minister is using this crisis as an ideological springboard to flip to default insourcing. I am agnostic on whether the scheme is provided in-house or externally, but there is little in the Government’s record to suggest that they are capable of running this scheme any less incompetently than the current operators. Retired civil servants do not need a lecture on procurement ideology; they need their pensions sorted today.
I am quite astonished by the shadow Minister’s contribution. The House should be in no doubt that the previous Government signed a 10-year contract in November 2023. That is the situation we were left with, and I have been grappling with it throughout my time in office. The idea that I have put ideology above operational urgency is utter and total nonsense. I have intervened strongly at every single opportunity, and I have held Capita to account on its milestones time and again, to the tune of £9.9 million, in a way that the previous Government never did.
I have a lot more sympathy with the shadow Minister on his point about compensation. We have introduced a process to pay interest in respect of pensions paid by Capita from 1 December 2025, whereby full benefits are paid more than one month after retirement. The interest rate applied will be based on the Bank of England base rate plus 1% for the period of the delay between retirement and payment. That information has formally been published on a civil service pension website, and members will have the opportunity to ask for other losses to be covered as part of the complaints process. As for the rest of the shadow Minister’s comments, I think he will struggle to find anyone who has been as robust as I have been in holding Capita to account.
Order. We refer to colleagues not by their names, but by their constituencies. You have already named the Chair of that Committee, so dive into the question.
I will dive very deeply into the question, Madam Deputy Speaker.
The Chair of the Committee sends his apologies for his absence; he is presently in a Committee meeting. We have looked at this situation on a number of occasions, and we will have a joint session with the Public Administration and Constitutional Affairs Committee and the Minister on Wednesday. The individual cases that we have heard are absolutely appalling, and we will relate them to Capita and the Minister. We have heard from two widows who have been waiting since last year to get their pensions sorted out, which is not acceptable.
I have two issues for the Minister to reflect upon. When the previous Government let the contract, we were in a situation in which procurement could not properly take account of the past record of companies, and I understand that the Government have now changed that. Looking at Capita’s past record on both the teachers’ pension scheme and the civil service pension scheme, we see that it has not run one scheme properly. That should have been taken into account before the contract was let.
The other issue, and this is where the Opposition spokesperson did say something relevant, is that this scheme was falling apart last year. The National Audit Office looked at it, and clearly it was going wrong then. So I ask the Minister: did he start to look at alternatives then and did he at that point start to put together in-house provision that could eventually take over?
My hon. Friend is absolutely right that these cases are harrowing. He is also right to say that there were huge issues—I am sure we will cover this on Wednesday—with MyCSP, the previous provider. As I have said, the previous Government decided to sign this contract in November 2023. That is not, of course, to say that I was just seeking specific reassurances last autumn; we were also looking at contingencies. I am sure that he, and indeed the hon. Member for North Dorset (Simon Hoare), will cover that in the two Committees’ joint evidence session on Wednesday.
I am grateful to the Minister for advance sight of his statement. The failure of Capita to meet the 30 June deadline is deeply disappointing, but, sadly, not surprising. Behind it sit 1.7 million current and former civil servants who simply want peace of mind that the pension they have earned through decades of public service will be handled competently, fairly and with dignity. Capita’s repeated failures are causing distress and uncertainty for people who deserve better, including several of my constituents, such as Sue from Romiley, Tracy from Offerton and Christopher from Marple.
The Public Accounts Committee did indeed warn that Capita risked not being ready to take over full administration back in December, and it raised serious concerns about weak contract management and poor oversight. Those warnings have now come to fruition as thousands of retired civil servants have experienced delays or complete failures in pension payments since Capita took over. How will the Government restore confidence for the 1 million-plus current and former civil servants who simply want reassurance that their pensions will be administered competently? What assessment has been made of the systemic failures in the administration of this scheme, and what lessons have been learned for future contracts of this kind? How can the Minister ensure that this failure is given sufficient weight should Capita have the brass neck to bid for any future Government contracts in this are or wholly unrelated ones?
To take the hon. Lady’s final point first, yes, bereavement cases are being prioritised. Capita’s current working assumption is that the remaining backlog of over 6,700 quotations for past retirement dates and the 4,100 actionable bereavement cases will be systemically cleared through the rest of July and August, and I hope this House will hold it to that timetable.
More broadly, the hon. Lady is absolutely right about learning the lessons from this situation and robustly holding Capita to account. That is why, as the House will be aware, I took the decision to end, for example, its contract for the Royal Mail pension scheme. The House can be assured that I will not hesitate to take robust action.
On the hon. Lady’s other point, which I think is a central one, I am always very conscious—contrary to what the shadow Minister says—of the operational position week to week in order to ensure that I am still driving the improvement of this pension scheme to the level it should be at.
This is a real mess, and I am pleased the Minister has acknowledged that, but there are a few practical things that could be delivered. There is no MP hotline, and there is a long and complicated process for MPs and their staff to go through the other hotline. Could that perhaps be resolved, because it would make things a lot quicker? When emails are sent, the same AI-generated generic responses are sent back repeatedly, which means that no progress is made. The to-ing and fro-ing is just wasting time. There could be clearer guidance about what MPs can pass on to our constituents who have challenges. Finally, postal delays are a real issue in my constituency and others, particularly in London—I see that Members from around the country are nodding—so could there be more use of email to, at the very least, get out the statement, even if there is eventually paperwork to be signed? Most organisations now manage to do paperwork via email, so could Capita not sort that out?
I am more than happy to take on board what my hon. Friend has said about streamlining MPs’ interaction with the service. The Parliamentary Secretary has passed on many of these points directly to Capita, and indeed has raised its behaviour directly with the Speaker’s Office. More broadly, I am more than willing to look at what my hon. Friend has said.
I thank the Minister for his statement and, through him, his officials, and particularly the surge team, who are trying to clear up this mess of Capita’s creation.
I am sure the Minister will share my bemusement at Capita’s stance. It seems to have no emotional intelligence whatsoever in relation to understanding the very demonstrable harm that is being done to constituents the length and breadth of this country. It does seem cognisant that His Majesty’s Government happen to be customer No. 1 as far as Capita’s balance sheet is concerned. Is it unwilling or unable to face into the situation as it currently presents itself, and really put its shoulder to the wheel and sort this out, or does he fear it has just given this up as a bad job, is just waiting for the contract to be taken from it and will just soft-pedal between now and when that time comes?
As ever, the Chair of the Public Administration and Constitutional Affairs Committee makes very sensible points. I make it very clear from this Dispatch Box that Capita certainly should not in any sense be soft-pedalling. It has specific contractual duties to which I have been holding it and to which I will continue to hold it. Aside from the commercial and money aspect of this, hugely important though that obviously is for public money, he is right to highlight the emotional impact. These people—the Liberal Democrat spokesperson talked about bereavement—are in a very vulnerable position in their lives and are seeking to access the money that they themselves paid in.
Order. To help more Members get in, questions need to be short and limited to just one question.
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Let me turn to the subject of parliamentary correspondence. The volume of MP complaints remains too high—there are more than 1,900 outstanding constituent cases. I understand that Capita resolved nearly 700 last week, but another 500 or so complaints were raised, so this remains all too current an issue. When I last reported to the House, the figure stood at 1,500. The growth of the backlog is completely unacceptable. Capita has clearly failed to manage the correspondence effectively, to the extent that I have had to ask the pensions recovery taskforce to step in. Indeed, the situation has been so faltering that the Parliamentary Secretary at the Cabinet Office, my hon. Friend the Member for Southampton Test (Satvir Kaur), has written to Mr Speaker about it.
Because of Capita’s persistent failures, alongside a wider, completely unacceptable failure in its overall MP engagement, demonstrated—as was reported to me by Members from across the House—by a poorly co-ordinated MP drop-in session at the end of May, I had to intervene again. I ordered the pensions recovery taskforce to take direct operational control and establish virtual surgeries for MPs and caseworkers running every weekday. I hope that has provided at least a direct route for parliamentary offices to try to secure updates. Since I launched that initiative in May, we have delivered more than 250 virtual surgeries, supporting more than 150 Members from across the House.
Let me now turn to the steps that I am taking to protect scheme members. I have no doubt that all Members will agree with me that the service that Capita has provided has been dreadful. We need to take further robust measures. First, I will continue to apply the most stringent commercial levers. We are executing robust, continuous action with immediate financial consequences. We have already hit Capita’s bottom line by withholding £9.9 million in payments, because the Government will only ever pay for what is successfully delivered.
I find this failure remarkable in the light of the personal assurances given to me by the chief executive ahead of the transfer. Those assurances have not been met. Core outputs are deficient, and Capita is failing even to make basic functionality work. I know that many Members are calling for the immediate termination of the contract and the insourcing of the service, but if I were to terminate the contract straightaway, that would clearly cause severe disruption to the payroll. I have to manage this so that the payroll is operated effectively; what I cannot do is create an immediate, catastrophic operational vacuum. I cannot replace a complex pension operation overnight. However, I have instructed my officials to bring together a broad range of stakeholders and experts to consider, in line with the Government’s strategy, how scheme members can best be served by a long-term, durable delivery of the scheme. Let no one think that I or the Government are accepting the status quo.
This episode highlights the severe limitations of outsourcing the civil service pension scheme. I say openly to the House that if I could insource this operation today, I would do so. None the less, it is Government policy to insource, in line with our manifesto commitment to deliver
“the biggest wave of insourcing of public services in a generation”,
and this pension scheme could be a prime candidate for insourcing in the future.
That future is being actively shaped by the Government’s announcement on 17 June of a new public interest test that will end outsourcing by default. From April 2027, all contracts over £1 million in value must be assessed for in-house viability before renewal, and Departments exceeding £100 million in annual spend must 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. To ensure full accountability, we are executing our contractual right to deploy independent auditors immediately to conduct a technical review of systems, data integrity and compliance with statutory duties. We are also beginning the process to appoint a remedial adviser, at Capita’s expense, to force rectification directly on the ground.
I am not ruling out further interventions, but we need to build the unvarnished evidence base that will serve as a strict prerequisite for further formal escalation, including potential litigation or step-in remedies, should performance fail to improve. In October, the House will receive a further update on the findings of the independent audit, the performance of the remedial adviser and the longer-term structural options being considered, including meeting our manifesto commitment by bringing the scheme in-house.
Let me finish by saying this. Public servants who dedicated their working lives to this country deserve absolute financial security and unwavering dignity in retirement, not corporate failure, empty promises and severe administrative failure. I hope the House will see the uncompromising line in the sand that I am drawing today. I will continue to apply commercial pressure and ensure full accountability, and we will find a way forward that delivers for the people who deliver for this country. I commend this statement to the House.
The Minister must answer four specific questions. First, given that the Public Accounts Committee explicitly warned of the Capita IT system’s unreadiness last October, what independent technical verification did the Cabinet Office conduct before Ministers allowed the December go-live to proceed?
Secondly, the Minister noted that the 140-strong Government surge team are costing significant resource. Although he intends to recover the costs from the £9.9 million withheld from Capita, will he guarantee that any remaining funds will be legally diverted into an immediate compensation scheme for those affected and for grieving families who have suffered real financial detriment?
Thirdly, the Minister expressed deep frustration at Capita’s wider public sector footprint. The Procurement Act 2023 is fully active, and it established a centralised debarment list specifically to stop failing legacy suppliers winning further public work. Will the Minister commit at the Dispatch Box to formally referring Capita to the Debarment Review Service for investigation, or will he allow it to continue bidding for other contracts while he waits until 2027 to implement his insourcing reviews? If the threshold is not met in this case, where will the Minister consider it appropriate to use the powers that he has?
Finally, given the Minister’s conclusion that Capita has always been an unsuitable operator of the scheme, can he tell the House why the current Government chose to award Capita the new Department for Work and Pensions contract—not in 2023, but this February?
Public servants who have dedicated their working lives to this country deserve financial security and dignity. They have been let down by corporate failure, as the Minister says, but they are also being let down by this Government’s failure to manage the contract when it matters the most. It is time for the Minister to stop blaming the past, stop pitching future ideological tests, and finally fix the operational reality on the ground.
The Minister has rightly called the thousands of unresolved bereavement cases harrowing. These grieving families are being denied closure. Will he commit today to ordering Capita to prioritise all bereavement cases as a matter of particular urgency, and will he guarantee that this specific backlog will be zero by a certain date?