--- title: "Capita's civil service pension failures cost it up to £40 million" description: "Seven months after Capita took over administration of the UK Civil Service Pension Scheme, retirees are still waiting on payments, the Cabinet Office has withheld £9.9m from the contractor, and Capita has warned of a hit of up to £40m to 2026 operating profit. Its shares fell 18% on the day it said so." category: "Personal Finance" category_url: https://boursel.com/category/personal-finance author: "Marcus Feldman" published: 2026-07-20T07:12:00.000Z updated: 2026-07-20T07:12:00.000Z canonical: https://boursel.com/article/capitas-civil-service-pension-failures-cost-it-up-to-40-million-pounds tags: ["pensions", "outsourcing", "uk", "capita"] --- # Capita's civil service pension failures cost it up to £40 million Seven months after Capita took over administration of the UK Civil Service Pension Scheme, retirees are still waiting on payments, the Cabinet Office has withheld £9.9m from the contractor, and Capita has warned of a hit of up to £40m to 2026 operating profit. Its shares fell 18% on the day it said so. Administration of the UK Civil Service Pension Scheme, which covers about 1.7 million members, passed from MyCSP to the outsourcer Capita on December 1, 2025. The Cabinet Office had awarded the contract in November 2023. What followed is now a case study in what happens when a pension administration transition goes wrong, and it has become expensive for everyone involved: retirees waiting on income, the government running an emergency support scheme, and Capita itself. ## What members experienced The failures were in the basic mechanics of paying people. Retirees reported waiting months for pensions to come into payment, bereaved families waited on death benefits, and members could not get answers because the contact centre could not cope. By the time Capita's chief executive was questioned by MPs in July, more than 6,700 quotations for past retirement dates and 4,100 bereavement cases were still outstanding. The government's own [recovery plan update of June 29](https://www.gov.uk/government/publications/civil-service-pension-recovery-plan-updates/civil-service-pension-recovery-plan-update-29-june-2026) shows a narrower and more improved picture on specific measures: 377 retirement cases were awaiting payment among members who had returned paperwork before May 30, Capita was seeking further information from about 1,000 members, and 3,387 bereavement cases were waiting on information from families. Average call waiting time had fallen to four minutes by June 19. Those two sets of figures are not in conflict, and the difference is worth understanding: they count different things at different dates. The larger numbers cover outstanding quotations and cases in aggregate; the smaller ones count members at a specific stage of a specific process at the end of June. Both are consistent with a backlog that has been worked down substantially from a bad starting point without being cleared. ## The government stepped in with loans The most telling detail is that the state had to lend people their own pensions. Employers have issued £14.2m in Transitional Support Loans to 2,612 members, alongside interest-free bridging loans. In an update on May 28, the taskforce raised the maximum bridging loan to £20,000, available in exceptional circumstances, from a range that had started at £5,000. A loan against a pension you are already entitled to is not compensation. It is a stopgap that keeps someone solvent while the administration catches up, and its existence is the clearest measure of how badly the transition went for the people at the end of it. The Cabinet Office announced a formal recovery plan in February 2026, two months after the handover. ## The apology, and who gave it On January 28, the Cabinet Office and Capita issued a [joint apology](https://www.civilserviceworld.com/professions/article/deeply-sorry-capita-ceo-and-cabinet-office-boss-apologise-for-pension-scheme-crisis) for the "worry, frustration and distress" caused, saying urgent cases were being prioritised. It was signed by Capita's chief executive Adolfo Hernandez and by Catherine Little, the senior civil servant responsible. A joint apology is itself informative. The Cabinet Office did not position itself purely as the wronged customer, which is consistent with the questions MPs have raised about whether the department's own oversight and readiness assessments were adequate before the December handover. ## What it has cost Capita The commercial consequences arrived in July. The Cabinet Office withheld £9.9m in payments over the contractor's failure to return service to contractual standards. Then came the profit warning. Capita said the contract's problems, and the investment needed to fix them, would reduce underlying operating profit by [£25m to £40m in 2026](https://uk.finance.yahoo.com/news/capita-reveals-earnings-hit-40m-071140614.html), with a free cash flow impact of £35m to £50m. The shares fell 18% on the day, having been down around 20% in early London trade, to their lowest in about a year. Hernandez told MPs the company would not stop until the failures were fixed, and Capita has added staff to the contract. ## Why this matters beyond one contract Two points generalize. The first is about pension administration as a business. It looks like a back-office function and is priced accordingly, but it involves migrating decades of records, in inconsistent formats, for people whose income depends on the data being right. A transition that goes wrong does not produce a degraded service; it produces pensioners with no income. The risk is asymmetric in a way that contract pricing frequently does not reflect. The second is about who ultimately carries the failure. Capita is paying, through withheld fees, a profit hit and a lower share price. But the immediate cost fell on retirees who went without income, and it was absorbed in the first instance by government loans rather than by the contractor. The financial penalties arrived months later. The scheme's administration remains under scrutiny, including from the Pensions Ombudsman, and members' groups have pressed for a full inquiry into how the contract was awarded and overseen.