Shares in Capita fell sharply after the UK Government criticised the outsourcing group’s management of the Civil Service pension scheme, raising the prospect of further intervention following widespread delays affecting thousands of pension members.
The outsourcing company saw its shares fall by as much as 16 per cent after Cabinet Office Minister and Paymaster General Nick Thomas-Symonds described the contract as a “prime candidate” for being returned to direct government control, although he ruled out an immediate transfer to avoid disrupting pension payments.
The criticism marks a significant escalation in the Government’s response to persistent operational failures under Capita’s £239 million contract to administer the pension scheme, which covers approximately 1.7 million current and former civil servants.
Speaking in the House of Commons, Thomas-Symonds said ministers were determined to recover “every single penny” associated with the company’s poor performance after deploying around 140 civil servants to help clear mounting backlogs.
The outstanding cases include more than 6,700 retirement quotations and over 4,100 bereavement claims, leaving many members waiting months for payments and pension calculations.
Capita acknowledged the shortcomings in a statement issued after the minister’s remarks.
The company said its handling of the scheme “has not been good enough”, apologising to members affected by delays involving bereavement claims, retirement processing and pension quotations.
Capita said new automation, technology and operational processes had now been introduced to accelerate the clearance of outstanding cases and that it was assessing the implications of the Government’s latest intervention ahead of a scheduled trading update later this week.
The Government has already withheld almost £10 million in contract payments after the company failed to meet agreed performance standards.
Ministers had previously imposed a June 30 deadline for operational improvements following repeated failures to deliver contractual service levels.
The latest controversy also follows Labour’s decision earlier this year to terminate Capita’s administration of the Royal Mail pension scheme after separate operational problems during the transition process.
Public sector union Prospect has joined calls for the Civil Service contract to be removed from Capita altogether, arguing that prolonged service failures have undermined confidence among scheme members.
For investors, the episode represents another setback for Capita as the outsourcing group continues efforts to rebuild credibility following several years of operational restructuring.
The dispute also reflects growing political scrutiny of outsourcing contracts across Whitehall, with ministers signalling a greater willingness to intervene where private providers fail to meet public service obligations.
As the Government weighs longer-term options for the pension scheme, Capita faces mounting pressure to demonstrate that recent operational improvements can restore confidence among both ministers and the 1.7 million members who rely on the service.
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