The following Statement was made in the House of Commons on Monday 6 July.
“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.
“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.
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 honourable 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’,
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.
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.