Source: Sharecast
Capita was awarded a contract to administer the 1.7m member scheme in November 2023, and started a two-year transition period. Paymaster General Nick Thomas-Symonds told the House of Commons late on Monday that Capita had given him "explicit, personal assurances" ahead of the handover that it was "fully capable of managing the workload and that they were ready for a successful transition".
However, he said: "The reality is that it was complexly unprepared and its system was overwhelmed, which resulted in a backlog that rocketed to a staggering 120,000 unresolved cases."
Capita had committed to meet two deadlines to clear inherited arrears by April this year - which it has already missed - and to return to standard contractually required levels by June.
Thomas-Symonds confirmed Capita had also missed the June deadline, as well as a later commitment to clear the quotes backlog by Monday.
In response, the government has parachuted in 140 officials to try and clear the backlog, the cost of which would be recovered in full from Capita, Thomas-Symonds confirmed. The government has also withheld £9.9m in payments.
Thomas-Symonds said while the service to date had been "dreadful", terminating the contract risked creating an "immediate, catastrophic operational vacuum".
But he warned: "However, I have instructed my officials to bring together a broad range of stakeholders and experts to consider…how scheme members can be best served by a long-term, durable delivery of the scheme. Let no one think that I or the government are accepting the status quo." He also acknowledged that the pension could be a "prime candidate" for insourcing in the future.
As at 1100 BST, shares in Capita had slumped 14% to 279.87p.
Capita said: "We recognise the service has not been good enough, particularly for members waiting on bereavement, retirement and quotation cases and we are sorry for the distress and inconvenience experience by those members.
"Capita is assessing the implications of the matters contained in the [ministerial] statement and, if required, will update the market as soon as it is able to do so."
The ten-year contract was valued at £239m by Capita in 2023.
Shore Capital said that while high-profile, the contract should have annual revenues of around £20m to £25m. "In the context of Capita’s £2bn revenue line, it is not material. Beyond the additional costs take to recover the operation, the principal issue here is reputational risk, distracting from other success stories the group can reference within their contract portfolio."
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