The contract for the new Royal Mail statutory pension scheme with Capita has been terminated, a Cabinet Office minister confirmed, after the services group “failed to deliver numerous milestones”.
Speaking in the Commons, Nick Thomas-Symonds stated the government had repeatedly flagged Capita’s delays.
He pledged it “will not hesitate to act decisively” to protect public servants’ pensions, assuring Royal Mail pensioners of efforts “to ensure continuity of service”.
In a statement, Mr Thomas-Symonds said: “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’m announcing today to the House 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. They failed to deliver numerous milestones, including a failure to implement the required IT automation.
“The Cabinet Office repeatedly flagged delays in transition milestones.”
He added: “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.
“But for these principles to be more than just words, they need to be underpinned by rigorous accountability and refusal to accept second best.”
Capita has come under fire in recent months for its management of pension services, with some members of the Civil Service Pension Scheme (CSPS) failing to receive regular payments after the company took it over in December.
Mr Thomas-Symonds told the Commons on Wednesday that assurances given to his department by the head of Capita over the CSPS have not been met, branding the financial impact on members “unacceptable”.
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The minister added that he, along with the permanent secretary of the Cabinet Office, had discussed the takeover of the pension scheme.
Capita has a backlog of 24,000 outstanding pension quotations and 1,500 unresolved complaints by MPs, a situation Mr Thomas-Symonds branded “totally unacceptable”.
The Government has already provided £7.2 million in interest-free transitional support loans to more than 1,300 members.
Mr Thomas-Symonds said: “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’m sorry to say 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 December 1 last year has fallen far short of the required standard.”
He added: “I want to say that 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.”
The minister also said a breach of the CSPS members’ data in late March was a “fundamental failure in data protection” and the Information Commissioner’s Office (ICO) has been informed, while the Cabinet Office has written to the chief executive of Capita to demand an account of the failure.
The Government is also withholding “milestone payments” where targets have not been met.
He added: “The Cabinet Office has mandated a clear recovery target.
“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.”
Capita took over the CSPS, which manages the pensions of 1.7 million public sector workers in the UK, including institutions such as the Crown Prosecution Service, HM Revenue and Customs and the Ministry of Defence, in a seven-year deal in December.
In January, Capita told the BBC it had expected a backlog of 37,000 cases when it took over the scheme, but the number of outstanding cases was 86,000.
By February, the Government announced a recovery plan to address the “unacceptable service levels” experienced by members, including a support loan scheme for those experiencing hardship.
Mr Thomas-Symonds told MPs on Wednesday that Capita has offered to cover the costs of a circa-140 person Government surge team sent in to bolster operational capacity, which he said he is considering.
“My priority is for taxpayers to not have to foot the bill for issues that have been caused by the provider, and is of no fault of the people who are the beneficiaries of this scheme,” he added.
John McDonnell, Labour MP for Hayes and Harlington, said: “It shouldn’t be an offer. It should be a requirement that they cover the cost of the recovery costs.”
The former shadow chancellor under Jeremy Corbyn urged the Government to terminate the CSPS contract with Capita and to transfer the service “in-house”.
This was also called for by Labour’s Clive Betts, deputy chairman of the Public Accounts Committee, who argued this could “prevent these recurring problems with a variety of private sector providers, which always seem to go wrong”.
Mr Thomas-Symonds said he keeps “all contractual options open”.
He added: “I will not hesitate to use the commercial levers that are under this contract to drive performance. That is why I am being as well, absolutely clear about that restoration of service by the end of June of this year, that is what I am upholding Capita to.”
Unite national officer Dominic Hook said: “Once again, Capita has proved itself to be totally unfit to manage the pensions of millions of public sector workers.
“This latest in a litany of extremely serious failures by Capita shows why the Government’s manifesto promise to reverse outsourcing is more important than ever. Ministers need to keep that promise by bringing the CSPS back in-house.”
Steve Thomas, deputy general secretary of the Prospect union, said it was becoming clear that outsourcing pensions contracts has been a “catastrophic failure” which should be reviewed.
“It is right that Capita are facing consequences for failing to hit their targets but if they continue to not deliver as promised then the contract should be removed from them,” he said.
A spokeswoman for Capita said: “Capita has administered the Royal Mail statutory pension scheme since 2018, and we will continue to support its 337,000 members during the transition period, working closely with the Cabinet Office to ensure continuity of service for members.
“We are very sorry for the serious issues that have been raised regarding our performance on the Civil Service Pension Scheme and the impact on its 1.7 million members.
“We recognise the distress this has caused and the strength of feeling being expressed.
“We take full responsibility for addressing these issues. Our focus is on ensuring members receive the service they expect and deserve, and on putting things right as quickly as possible.”