Pension Schemes

I wish to provide the House with an important update on key pension, contractual and commercial decisions.

The security and dignity of those who have dedicated their careers to our public services are not negotiable, and they deserve a pension service that is reliable, efficient and secure. For those principles to be more than just words, they need to be underpinned by rigorous accountability and a refusal to accept second best. We recognise that for our public servants, these services are the foundation of their financial security. When the standards they deserve are not upheld, the Government will not hesitate to act decisively to protect their interests. It is in that context that I want to give the first update to the House on the Royal Mail statutory pension scheme.

Following a failure to meet critical transition milestones and a lack of confidence in Capita’s ability to implement and transition to the new operating model in a timely fashion, I am announcing today that I have terminated the new Royal Mail statutory pension scheme contract with Capita. Capita had an 18-month planning window to prepare for the transition. It failed to deliver numerous milestones, including a failure to implement the required IT automation. The Cabinet Office repeatedly flagged delays in transition milestones and that IT automation, ultimately issuing formal correspondence to reaffirm the mandatory requirements. To ensure members are protected, we will ensure continuity of the existing contract, but let the message be clear: I will not and we will not tolerate delivery failure from contracted partners. Public services require high-quality delivery, and public money should not be used to fund performance that falls short of the standards we expect.

I also want to address problems in the administration of the civil service pension scheme. The transition process from the previous provider, MyCSP, was not satisfactory. We are investigating the respective liabilities for those failures as between Capita and MyCSP. Given the criticality of these services, the Cabinet Office permanent secretary and I discussed transition with the chief executive officer of Capita. We sought and were given explicit personal assurances that the transition would be handled with the utmost care and that any backlogs would be managed effectively. I am sorry to say that those assurances have not been met.

It is clear in any event that the delivery of the service to civil servants since the transfer on 1 December last year has fallen far short of the required standard. The delays that civil servants have faced in accessing their civil service pensions are unacceptable, especially in view of their many years of dedicated public service. That is why I established a specialist pensions recovery taskforce, led by the second permanent secretary at His Majesty’s Revenue and Customs, Angela MacDonald, to take strategic oversight of the scheme’s management. That intervention, which includes a circa 140-person Government surge team to bolster operational capacity, is delivering results, including helping Capita to clear 15,000 inherited unread emails. Telephony wait times that averaged more than 90 minutes earlier this year have been successfully brought down to an average of under two minutes.

The stories we have heard of members missing mortgage payments and falling into hardship are distressing and entirely unacceptable. No one should have to face such financial anxiety after a lifetime of dedicated public service. That is why I took immediate action to ensure that no member was left to face these challenges alone while these service issues are being resolved. To mitigate the impact on those most affected, we have already provided more than £7.2 million in interest-free transitional support loans to more than 1,300 members. We are proactively driving the uptake of those loans to ensure that no member in need of support is missed, and I encourage all hon. and right hon. Members to ask their eligible constituents to reach out to their civil service employers for these loans, so that we can provide the vital support they deserve.

I can tell the House that Capita was explicitly instructed in July 2025 to prepare for the volumes it is now seeing. It knew the scale of the challenge, but failed to deliver the IT automation and portal functionality required when the service went live. The result, I am afraid to say, is a backlog of around 24,000 outstanding pension quotations. There is also a backlog of more than 1,500 open MP complaints. That is totally unacceptable. I have instructed officials to speak to Capita about how we can ensure that MP correspondence is dealt with quickly and efficiently, noting the importance of the fact that Members across the House were speaking up for their constituents. These are not just numbers on a spreadsheet; they represent thousands of individuals who are unable to plan for their futures or retire with dignity.

Service delivery is about more than just speed; it is also about the absolute security of member data. The breach we saw on 30 March, which saw personal information compromised on the pension portal, represents a fundamental failure in data protection. To be clear with the House, I will not tolerate these lapses. The Cabinet Office has formally notified the Information Commissioner’s Office of this breach, and we have written formally to the chief executive officer of Capita to demand a full technical account of this failure and a guarantee that it will not happen again.

Across the civil service pension scheme, we have taken direct action on all commercial levers. We are withholding milestone payments where deliverables have not been met, and we reserve every right to take further formal action. The Cabinet Office has mandated a clear recovery target on service levels. Capita must clear all inherited arrears by the end of this month and restore service levels to standard, contractually required levels by the end of June this year. We will continue to use every commercial lever at our disposal to ensure that these standards are met.

The security and dignity of all those who have dedicated their careers to our civil service and the Royal Mail are not negotiable. They deserve a pension service that is reliable, efficient and secure. We will continue to use every lever at our disposal to ensure that those standards are met and that members receive the service they have earned. I commend this statement to the House.

I call the shadow Minister.

I begin by paying tribute to our fantastic public servants, civil servants and postal workers. The vast majority give so much in service of our country and the general public. This week, perhaps more than any other, is a reminder that it is Ministers’ responsibility to provide the political leadership so that those workers can deliver. The Minister’s decision to terminate the Royal Mail statutory pension scheme is enormously consequential and will be welcomed by many in this House, but more so by our many retired postal workers.

While I appreciate being given advance sight of today’s statement, it does seem that the Minister, particularly in regard to the civil service pension scheme, has come to the House with more of a plan than a statement. It is clear that the current situation, as the Minister said, is the culmination of a series of entirely unforced errors by Capita. Its failure to adequately administer the CSPS has caused significant financial distress to thousands of former public servants, such as my constituent Chris. He has found himself without the pension he was relying on at just the time that his wife has had to step back from work after a cancer diagnosis.

These people worked hard and planned responsibly for retirement, on the basis that the CSPS would be there for them when they needed it. Capita’s failures have left them anxious, frustrated and, in many cases, desperately out of pocket, but in all too many cases that I am aware of, Capita has been utterly unresponsive. Sadly, the constituents and others from around the country who have contacted me about Capita simply would not recognise the Minister’s claim of answer times being down to two minutes. This is not the way to reward a career of dedicated public service.

Last year, the National Audit Office highlighted that Capita had failed to meet three of the six key transition milestones that had been due by March 2025. All those milestones related to scheme design and operational readiness. In October last year—two months before Ministers had to make a final decision on the transition to Capita—the Public Accounts Committee noted that Capita had missed milestones to deliver its IT systems. The Committee called on the Cabinet Office to fully develop contingency plans before making a final decision about whether Capita should take over administration on 1 December last year.

First of all, I echo the shadow Minister’s tribute to public servants, including his constituent Chris; I am very sorry to hear about his wife’s cancer diagnosis. I welcome what I think was his support for my decision to terminate the Royal Mail statutory pension scheme contract. On the civil service pension scheme, he asked about a plan; I have been implementing a plan, and I have come here to update the House on its implementation. He also talked about the contract. The Capita pension scheme contract was awarded by the previous Government in November 2023 on a long-term basis. That is what I inherited and have been trying to deal with. He talked about the point of transition; what I did at the point of transition was get in the Capita chief executive and the Cabinet Office permanent secretary to go through these matters, and to seek assurances. I am afraid to say that the assurances given have not been met.

The shadow Minister talked about not meeting milestones; I can assure him that milestone payments have been withheld, and I will not hesitate to use the commercial levers in the contract to drive performance. I am absolutely clear about the restoration of service by the end of June; that is what I am holding Capita to. He also talked about MyCSP. I have said that we are reserving rights under both these contracts, with regard to the backlog that was left by MyCSP and how Capita has dealt with it since. In relation to MyCSP, there is also an option to pursue a parent company guarantee, and he can be assured that I will explore all possible legal options to ensure that the service that public servants rightly deserve—not just in retirement, but in very difficult circumstances, such as death in service—is being provided sensitively.

The shadow Minister asked about forthcoming meetings and updates. I will consider the appropriate steps to take, and will update the House, and Members from across the House when they write to me.

The Public Accounts Committee has had a number of hearings on this issue, and I am sure the Chair, the hon. Member for North Cotswolds (Sir Geoffrey Clifton-Brown), will want to ask some questions. First of all, there is a shared responsibility here. MyCSP has responsibilities, but I have to say that the Cabinet Office oversaw this, and there are real questions that the Minister should be asking officials in the Cabinet Office about their degree of responsibility.

We have had so many assurances on this. Are the June assurances really going to be kept to? This is not a one-off issue, is it? The civil service pension scheme has had at least three different problems with three different providers in the past. We have had the teachers’ pension scheme, the Royal Mail pension scheme—an awful lot of them. We asked the Cabinet Office permanent secretary whether she would go away and look at having an in-house team built up to administer public sector pensions in a way that might prevent these recurring problems with a variety of private sector providers, whose arrangements always seem to go wrong.

My hon. Friend can rest assured that I have interrogated officials on the situation that I inherited. On the point about assurances and promises not being met, I think the House can say today that when assurances are not met, I take decisive action, including commercial action. My hon. Friend will have seen that with regard to the Royal Mail statutory pension scheme, but also in our withholding milestone payments from Capita. He talked about whether we are looking at insourcing more things. That clearly is the Government’s pledge, and our policy going forward. With regard to the Royal Mail statutory pension scheme, we will look at a range of options in both those categories to ensure that we get the very best possible service for those who deserve it and rely on it.

I call the Liberal Democrat spokesperson.

I thank the Minister for his statement. We have learned today that this contract was awarded two and a half years ago. Capita had two and a half years to prepare for taking on the administration of the civil service scheme. As has been mentioned, the Public Accounts Committee warned in October that Capita was not ready, yet it took on the contract regardless on 1 December. Today we learned also that the Government have terminated another Capita contract, for the Royal Mail pension scheme.

My constituents would like answers to the following questions. How many people on the civil service pension scheme, as of now, have not received payments that they should have had? Why should taxpayers be paying for the surge in His Majesty’s Revenue and Customs staff? A hundred and forty staff have come in to sort this out. Surely Capita should be paying for its incompetence. What is the timeline for Capita to clear up all inherited arrears, and is it prioritising hardship and bereavement cases? With regard to the Royal Mail pension scheme, now that Capita has been terminated, what is the plan?

As I said in my statement, there is a backlog of around 24,000 outstanding pension quotations. The hon. Gentleman is absolutely right about the taxpayer not having to pick up the tab for Capita’s failures. There has been an offer from Capita to cover the costs of the surge team, which I will consider in my broad consideration of all the commercial issues in respect of this contract. My priority is for taxpayers not to have to foot the bill for issues that have been caused by the provider and are not the fault of the scheme beneficiaries.

With regard to the Royal Mail statutory scheme, as I have said, we will now ensure continuity of service, because that is very important. I think the hon. Gentleman will see that I have been very decisive on the future of that contract today. We will look at a range of options for that, but continuity of service is obviously a priority in the short term.

I declare an interest as the chair of the PCS trade union parliamentary group. The Minister just said that there was an offer from Capita. It should not be an offer; it should be a requirement that it covers the recovery costs.

It was outrageous that the civil service scheme was given to Capita after its failure on the teachers’ pension scheme, its failure with regard to the NHS data releases, and the failure on the military contract. This failure has affected so many civil service pensioners. It has caused real harm, suffering and stress. It is equally outrageous, I have to say, that its performance has not warranted the removal of the contract altogether. The Minister has today terminated the contract with Royal Mail. Why has he not terminated this contract?

My hon. Friend the Member for Sheffield South East (Mr Betts) raised the issue of the preparation of in-house provision of the civil service pension scheme. The Minister did not refer to those preparations. Will he meet the trade unions and discuss how we bring the administration of the civil service pension scheme in house, because as sure as night follows day, Capita will fail on this contract, as it has done on every other?

I certainly echo what my right hon. Friend says about it being imperative that taxpayers do not foot the bill for what has gone wrong. On the different contracts, each obviously has to be considered on its own merits, but the House can be assured that on each of the contracts for which the Cabinet Office is responsible, I keep all contractual options open. With regard to his point about optionality and going in-house in future, I will certainly ensure that the PCS trade union gets the appropriate ministerial meeting.

I thank the Minister for his statement, and for meeting me to discuss this issue. As he is aware, the Public Accounts Committee has held multiple sessions with Capita on the broader civil service pension scheme and the problems that scheme members are having accessing their pensions. As numerous colleagues from across the House will have experienced, some of these cases are tragic and deeply distressing. People have not been able to get statements, or even payments, at the most important points of their life. Does the Minister have confidence that his team will be able to manage Capita and rapidly provide civil service pensioners with the scheme that they deserve? Secondly, what reassurance can he give Royal Mail pensioners that their pension scheme will be managed properly during the transition and afterwards, either in-house or by an external provider?

I can certainly give an assurance to Royal Mail pensioners, who may be worried about the uncertainty, that we will do all we can to ensure continuity of service. I certainly have confidence in my team, and the surge of about 140 officials into Capita has made a significant difference. Equally, I will clearly have to consider very carefully what the position is at the end of June 2026, and how important that team’s remaining in place, for whatever length of time, is to the level of service.

I should declare that I have preserved benefits in the CSPS, and that I am a member of the PCS trade union.

I thank the Minister for his decisive action in terminating the contract for the Royal Mail pension scheme, and for the ongoing work that he is doing with regard to the civil service pension scheme. He has flagged that there are hard-working public servants who have given their service to the state for many years, and who have been failed when they have looked to retire and to get their pension benefits. I hope that he will hold Capita’s feet to the fire; many of us will be keeping our eyes on the Minister as he does. Will he prioritise those who are entitled to bereavement payments under the death-in-service part of the CSPS? This is a very difficult time for them, and they may not have actually been employed; it is dependants, and sometimes children, who are entitled to these payments.

I absolutely agree with my hon. Friend on the importance of bereavement payments, because they are made at such a vulnerable time in people’s lives. The House should be fully aware that I will hold Capita robustly to account on its various contracts. As I am sure that the House will appreciate, in the case of the civil service pension scheme, I have inherited quite a long-term contract, but I will continue to make sure that I reserve all contractual rights on the contracts that we oversee at the Cabinet Office.

Like other MPs here, I have constituents who have dedicated years to public service. One, a prison officer, was stabbed and assaulted in his work, and then had the privilege of being at Camp Zeist to supervise the imprisonment of the Lockerbie bomber while they were on trial. I have another constituent who is caring for her mother, who is the beneficiary of a pension and is having palliative care for stage 4 cancer. The Minister has given a very good overview of what is happening, and he talked about the changes that have been made to call times, but one of the themes coming through is about accessing the portal. That issue is leading to a real erosion of trust. If people cannot even get access to the system, it is a real problem. Could he give us an update on that?