UK government admits failure in civil service pension outsourcing to Capita

The UK government has formally acknowledged that retired civil servants have been failed by the outsourcing of their pension scheme to private firm Capita, citing significant maladministration that has resulted in payment delays of up to a year. The Cabinet Office confirmed its intention to bring the scheme back in-house, describing the move as part of the "biggest wave of insourcing in a generation," after Capita repeatedly missed recovery targets and delivered service levels deemed "completely unacceptable" to members and taxpayers.

Thousands of scheme members, including bereaved relatives, have experienced severe financial hardship as a result of the administrative chaos. Some individuals have reported being unable to afford rent or have been forced to utilise food banks due to the lack of income. An estimated 17,000 relatives of deceased claimants are also facing distress, with delays in processing death-in-service benefits leaving families in precarious financial positions.

Specific accounts of hardship have highlighted the human cost of the delays. A 98-year-old woman, whose husband died last December, faces potential financial support from her sons after a three-month struggle just to establish the required application forms. Similarly, Sarah Colhill, a young widow, has been forced to claim universal credit after a nine-month delay in receiving an £86,000 lump sum, leaving her unable to afford rent while caring for her disabled daughter.

The controversy centres on Capita’s management of the scheme since December, during which the firm inherited a backlog of 90,000 cases from the previous administrator, Equiniti. Although the Cabinet Office initially expressed confidence in Capita’s ability to improve service standards in January, the government conceded six months later that the company had failed to meet critical milestones. Capita has apologised for the distress caused and stated that new processes, automation, and technology have been implemented to work through the backlog.

In response to the failures, the Cabinet Office announced it would withhold payments to hold Capita accountable during the transition period. The decision follows a report by parliament’s public accounts committee, which had previously advised the government to bring the scheme back in-house, accusing ministers of failing to intervene when service standards plummeted under Equiniti. The Public and Commercial Services Union criticised Capita for missing deadline after deadline, noting that civil servants continue to pay the price for these administrative failures.