Key facts
- Capita anticipates a profit reduction of £25m to £40m due to issues with the civil service pension scheme.
- The company's chief executive, Adolfo Hernandez, apologized for the service failures.
- The government has withheld £10m from Capita and seeks to recover all associated costs.
- Over 6,700 retirement quotations and 4,100 bereavement cases were outstanding at the end of last month.
- The government has provided £15.6m in hardship loans to 2,700 members awaiting payments.
Capita has warned that the cost of rectifying failures at the civil service pension scheme could reduce its annual profits by up to £40 million. The outsourcing firm's shares fell by nearly 21% following the announcement. Chief executive Adolfo Hernandez apologized for the "very poor service" that has led to thousands of civil servants experiencing delays in receiving payments and retirement quotes.
The company cited extra staff costs and penalties for missed targets as reasons for the financial impact, which it estimates will be between £25 million and £40 million. The government has already withheld nearly £10 million from Capita due to service shortfalls, and there are increasing calls for the company to lose its contract.
Angela MacDonald, HMRC deputy chief executive, informed a Commons committee that a taskforce of civil servants brought in to help clear the backlog would cost £12.5 million. Nick Thomas-Symonds, the paymaster general, stated the government's intention to recover all costs from Capita, emphasizing that public money should not fund corporate failures.
To support those most affected, the government has offered interest-free hardship loans, with £15.6 million lent to 2,700 members awaiting payments. The committee also heard a distressing account of a terminally ill pensioner who died before receiving a requested quote.
Capita executives attributed some of the delays to the scheme's complex rules and missing data. Richard Holroyd, chief executive of Capita's public service division, acknowledged that the company was making a loss on the contract due to the additional expenditure but stressed the priority was restoring service and rebuilding trust.