Civil Service Pensions

My Lords, I apologise to the House and to the Minister for having to wear these glasses today. I am doing so on medical advice. Before turning to the questions raised by the Statement, I want to express my deepest sympathy with the civil servants and families caught up in this failure. Many of those affected will have given more than four decades of their lives to public service. They have planned their retirement in good faith and, having left work, may now be entirely reliant on their Civil Service pension to meet ordinary household bills and maintain the standard of living for which they have worked and saved. They should not be forced to borrow, depend on relatives or postpone retirement because the state cannot administer the pension it promised them. The damage done to their finances, health and confidence is unprecedented and entirely unacceptable. I thank the noble Baroness for giving the House the opportunity to question this important Statement. Our first concern must be the people affected, with more than 6,700 pension quotations still outstanding for past retirement dates and more than 4,100 bereavement cases on which Capita can take action. Behind every figure is a retired public servant, a grieving family or a household left in uncertainty. They must remain at the forefront of the Government’s response. The Paymaster-General has emphasised that the Capita contract was signed in November 2023 under the previous Government. That is a relevant fact, but it cannot be the end of the matter. The Cabinet Office retained institutional responsibility throughout a two-year transition between Governments, and critical decisions on readiness, data migration, contingency planning and the go-live of the contract on 1 December 2025 were taken after repeated warning signs. The issue is not only who originally signed the contract but whether the Cabinet Office acted as a capable and sceptical contracting authority. On these Benches, our concern is not ideological and we remain agnostic about whether a service is delivered in-house or by a contractor. Either way, the Government must remain an intelligent and accountable customer. The National Audit Office reported in June 2025 that Capita had already missed three of the six transition milestones that were then due, that the Cabinet Office had withheld £9.6 million of payments and that the service planned for launch had been simplified because important functionality would not be ready. It also found there were no fixed innovation or digitalisation milestones against which the promised benefits could be managed. In October, the Public Accounts Committee warned that there was a clear risk that Capita would not be ready to take over as planned and concluded that the Cabinet Office had not shown that it could effectively manage the outsourced administration of the scheme. The evidence given to parliamentary committees since the collapse is more troubling still. Senior Cabinet Office officials have acknowledged that they relied heavily on assurances from Capita, that there are lessons to learn and that the department is still not fully confident in the quality of Capita’s management information. Independent technical auditors are now being brought in to test the data, systems and assumptions. That is welcome, but it raises the obvious question: why was that independent specialist verification not completed before the system was permitted to go live? We welcome the withholding of £9.9 million from Capita and the intervention of the pensions recovery task force, but a recovery task force, however necessary, is a remedy for failed contract management. It is not a substitute for proper assurance before launch. Can the Minister therefore tell the House who authorised the go-live decision, what objective go or no-go criteria were applied, which criteria Capita had failed to meet and whether any requirements were waived? Will the Government publish the relevant readiness assessments, assurance reports and risk decisions, subject only to genuinely necessary commercial redactions? Capita has now missed both its end-of-April and end-of-June recovery milestones. Scheme members should not be asked to rely on another unverified promise. What firm dates have now been set for clearing the overdue retirement quotations and actionable bereavement cases? Have those dates been independently stress-tested by people with the technical and operational expertise to verify that they are deliverable? There are also wider questions about supplier management across government. Will Capita be referred to the Debarment Review Service or will it continue to be permitted to compete for public contracts without such a review? Why was Capita selected in February as the preferred bidder for the DWP-led Synergy shared services contract while serious concerns about the pension transition were already evident? What cross-government assessment of Capita’s delivery risk was undertaken before that decision was finalised? Finally, I welcome the provision for interest where full pension benefits are paid more than one month late and the ability to seek redress for other losses through the complaints process. However, compensation delayed can compound the original harm. What service standards will apply to those complaints? How quickly will consequential losses be assessed and paid? How will the Cabinet Office ensure that Capita, not affected pensioners and not the taxpayer, ultimately bears the cost of this failure? This is a corporate failure by Capita, but it is also a grave failure of public sector commissioning, assurance and contract oversight. Civil servants who have spent their working lives serving the country were entitled to expect the Cabinet Office to test promises, verify systems and manage risk before transferring a service on which their livelihoods depend. The Government must now resolve the individual cases urgently, compensate those who have suffered loss and demonstrate that the machinery of government has learned the fundamental lesson: outsourcing responsibility does not outsource accountability.

My Lords, Capita’s failure to meet its end-of-June deadline following the previous end-of-April missed deadline is obviously extremely disappointing, but this is a story not just of corporate failure, missed KPIs or missed calendar dates but of so many individual cases of heartbreaking distress, especially for those whose loved ones died unexpectedly and who are now left in limbo, in uncertainty and, in many cases, facing financial hardship as well. To be fair, the Government’s rhetoric on this has been fairly robust not only in reminding us of when the original contract was signed but also, for example, in the Minister saying in the Statement: “I will continue to apply the most stringent commercial levers”. I note that, in the discussions in the Select Committees’ joint meeting in the House of Commons last week, there was some discussion of the pros and cons, for example, of sacking Capita outright from this contract. But one of the other stringent commercial levers that could be applied, of course, would be to raise the question whether Capita should be placed on the debarment list, if its failures in this case so significantly undermine our confidence in its ability as a company to deliver on its promises that it would not be appropriate to award it any new future contracts. Such a step might help concentrate minds somewhat when it comes to resolving the current problem. Of course, adding any company to the debarment list—and I think this would be the first company to be so added—is, I appreciate, not a step to be taken lightly, but the scale of repeated failure in this case is quite striking, as is the scale of repeated broken promises. Capita clearly made commitments on technology and then to meet remedial deadlines that it has not met. Those commitments were not just made off the cuff, casually, at a junior level; as the Cabinet Office’s Permanent Secretary set out in her evidence in the House of Commons last week, these were very serious commitments made at senior level that have not been delivered on. Given this record from Capita, can the Minister tell us: will the Government consider commencing the process to review adding Capita to the debarment list? I turn to the existing contract and its problems. The Cabinet Office has said—and I think this is very welcome—that it is doubling its capacity to deal with pension complaints, which will increase following these many problems. Of course, the Pensions Ombudsman, a little bit further down the track, could expect a surge of complaints working its way through the system as well. Although there have been comments and commitments about how Capita is paying some of the costs of dealing with this mess, I do not think it has been made clear yet, and I hope the Minister can therefore clarify, whether Capita will pay for the extra costs that the Cabinet Office, and in due course the Pension Ombudsman, will incur for dealing with the complaints arising from this mess. Given the dependency on Capita for getting the McCloud remedy cases resolved, and indeed the extra pressure of legal deadlines in those cases, what extra steps are the Government now taking, given Capita’s failure to deliver on that end-of-June deadline and the obvious doubts that therefore arise about its ability to deliver what it has promised in other key areas? That question also applies to Capita’s recently won synergy contract. Finally, to return to the main pensions fiasco, the Minister in the Commons said the Government are imminently expecting a new update and a new set of promises from Capita. Given that we will shortly go into recess, can the Minister also update us on what the Government’s intentions are to ensure that Parliament is fully updated on those new plans before recess commences?

My Lords, I echo the words of the noble Baroness, Lady Finn, and the noble Lord, Lord Pack, and pay tribute to our fantastic public servants. Many Members of your Lordships’ House have worked extremely closely with members of our Civil Service. They deserve, at the very least, the security and dignity of a decent pension, which is their entitlement, and their deferred salary, rather than what they are currently experiencing. We are talking about people who have dedicated their careers to our public services. It should be non-negotiable that they deserve a pension service that is reliable, efficient and secure. We are, after all, discussing their deferred salary, and too many experiences have simply been appalling. When the standards they deserve are not upheld, the Government will not hesitate to act decisively to protect their interests. The failure of Capita to meet its critical operational recovery milestones follows a complete non-delivery of promised automated technology and artificial intelligence infrastructure. Capita’s senior leadership team gave explicit personal assurances to Ministers and to very senior civil servants ahead of the handover that they were fully capable of managing the workload—yet they were clearly completely unprepared, allowing the system to become overwhelmed and the backlog to peak at a staggering 120,000 unresolved cases. The operational reality since the transfer to Capita on 1 December has fallen far short of the required standard. As of the end of June, there were still more than 6,700 outstanding retirement quotations for past retirement dates and over 4,100 unresolved bereavement cases on which Capita could and should have taken action. The stories of members and grieving families falling into hardship are distressing and entirely unacceptable. This is why a specialist pensions recovery task force was established to take strategic oversight of operations and ensure no one faces financial anxiety alone. The emergency transitional support loan scheme has been expanded, with over £15.6 million in interest-free funds already issued to more than 2,842 members who need financial support while we very quickly try to fix what is so horribly broken. Without the vital support of the Cabinet Office pensions recovery task force and the 140-strong government surge team, the progress that has been achieved would simply not have happened. This intervention was essential to inject immediate operational capability when the system was overwhelmed. To reassure your Lordships’ House, as both the noble Baroness and the noble Lord have asked, public money will not be used to fund corporate failings. We will claw back every single penny of these surge costs directly from Capita. There is no intention to remove a single member of the team until the service is permanently fixed and fully restored to contractually required standard levels. The noble Lord, Lord Pack, asked about the Pensions Ombudsman. I believe we will be several months away from that, but we will have a meeting over the summer to look at all the costs concerned. I will ensure that those potential costs are considered as part of any arrangement. Transitioning to Capita was assessed as the operationally lower risk path to safeguard scheme continuity, given that remaining with the previous provider, MyCSP, had become commercially and operationally unviable. The only alternative proposal demanded astronomical costs and the total removal of all standard service level agreements for the contract—all while the backlog of cases was increasing by 10,000 every month while MyCSP was in charge. Crucially, ahead of a handover, explicit personal assurances were secured directly from Capita’s chief executive that they possessed the necessary operational capacity to manage the transferred workload successfully. This is remarkable, considering that ahead of the transition the chief executive of Capita even promised that technology improvements would create a flagship use case for the largest AI-enabled pension scheme in the country. It is now clear that the non-delivery of technology has been a fundamental part of Capita’s inability to deliver. Because those guarantees have been broken, milestone payments totalling £9.9 million have been withheld. We have instructed Capita to provide a full rectification plan by 14 July— tomorrow—and every right is reserved to take further formal action, including potential litigation or direct control step-in remedies. As both the noble Baroness and the noble Lord highlighted, Capita has missed both its end of April and end of June milestones to return service to standard, contractually required levels. These were milestone deadlines that Capita agreed to; they were not imposed on Capita. It has failed to meet its own deadlines. Its current working assumption is to systematically clear the remaining past retirement quotes and actionable bereavement backlogs throughout July and August. To provide robust oversight on the ground, we are immediately deploying independent technical auditors to review data integrity, alongside a remedial adviser, appointed at Capita’s sole expense, to force daily rectification. On Synergy, while individual public sector deals such as the DWP Synergy contract are governed under separate legal regulations, this crisis highlights the limitations of outsourcing. Under the new public interest test, introduced on 17 June, outsourcing by default will end, and this pension scheme remains a prime candidate to be brought permanently back in-house. The noble Baroness and the noble Lord asked me two specific questions on debarment and the Procurement Act 2023. Noble Lords will appreciate that we are in the middle of a contractual dispute, so we are following each element of our contract. I therefore cannot comment in detail on next steps regarding any contract, but all strategic suppliers remain under constant review. We will not hesitate to use our powers under the Procurement Act to investigate and, where appropriate and proportionate, exclude poorly performing suppliers from future procurements. The noble Lord, Lord Pack, raised the implementation of the McCloud remedy. This is a complex programme requiring revised statements for approximately 74,000 pensioners and 21,000 deferred members. We are working hard with Capita to aim to keep to our target of issuing the majority of revised option statements during 2027, and we are applying rigorous commercial pressure to ensure that these public servants receive the correct pension adjustments they are owed. I take this opportunity to confirm to Members of your Lordships’ House that current recipients of the pension scheme have not been affected by this appalling contractual failure; the problems lie with people who are seeking to access the scheme. Given how many people are members of this pension scheme, it is important that we do not scare current recipients with what is happening. In conclusion, as the noble Baroness, Lady Finn, rightly pointed out, every statistic is not a number but a family, a retired civil servant—a human being not receiving their core pension entitlement. This is simply unacceptable. We will continue to use every commercial lever at our disposal to ensure that members receive what they have earned. In October, your Lordships’ House will receive a comprehensive formal update on the definitive findings of the independent audit and the longer-term structural options for the scheme.

I thank my noble friend for the Statement. As she knows, I have been asking questions on this issue for most of this year, so I welcome the attention it is now receiving from the ministerial team and the work they are doing. Of course, the issue of outsourcing and the role of Capita will have to be dealt with, but I am sure my noble friend agrees that the priority now is to get the payments to the people who need them. I attended the Statement in the House of Commons and listened to MPs repeating stories of the problems faced by the recipients, and I went to the Joint Committee meeting for as long as I could bear it. We all know that there are real human problems here. Of course, it is good that interest is being paid on late payments and that loans are being made. The interest rate is Bank of England plus 1%, but that is the rate paid when the Government pay people money. When the Government claim money from people, they charge a higher rate of interest. My view is that, in these circumstances, the higher rate of interest should be payable by Capita. Perhaps my noble friend could look at that matter and reconsider it. The more important thing is that, in the Commons, the Minister said in reply to a question that “members will have the opportunity to ask for other losses to be covered as part of the complaints process ”.—[Official Report, Commons, 6/7/26; col. 66.] We are beyond that stage now. These people deserve compensation for the mental stress and anguish that they have suffered, and we should expect Capita to give them cash compensation for the problems it created.

I thank my noble friend for all his work to raise this and to work so constructively with my colleagues here and at the other end. On the specifics, I heard what he said about the interest payment—that may be a little above my pay grade, but I will raise it with colleagues. I very much appreciate my noble friend’s questions about compensation, but he will appreciate that we are still in the middle of trying to stabilise the pension scheme. I genuinely did not think I would be here saying that; I had hoped that, by this point, we would be well beyond that and Capita would have met its milestone deadlines, but it has not. There are still 429 people waiting on ill health retirement cases, 131 of whom have been waiting for two months, and 618 outstanding death in service cases, with 237 waiting for more than four months, as well as the harrowing stories that we have heard. We need to fix that and then look at what comes next.

My Lords, this fiasco has made clear that Capita cannot deliver what its chief executive promises. Can the Minister tell the House how many contracts with government Capita still has, whether there is any overall evaluation of how those contracts are performing, and how confident the Government feel, despite her welcome assurance that contracts are regularly evaluated, that Capita is now up to the job of fulfilling those contracts?

The noble Baroness is right: the reality is that Capita provides contracts across government. In fact, we are its single biggest client, I believe. Capita holds a total of 85 contracts across the public sector: 39 in central government and 46 in the wider public sector. Some 87% of its KPIs—key performance indicators—are rated as good. But the noble Baroness is absolutely right, which is why we are now reviewing Capita’s performance across the government portfolio.

My Lords, I declare an interest: I am a member of this scheme. Let no one say that the British became bad Europeans lately: in 1978, in a last-minute endeavour to put off direct elections, Jim Callaghan persuaded the Council of Ministers that, instead of having a common European pension and salary, MEPs would be paid and pensioned by their member state. That lasted until—believe it or not—2009. Of course, he had not thought it out. When he came back, the then Civil Service Pension Scheme, based in Basingstoke, was told to organise a pension, which it did. After many years, the European Parliament Members’ pension scheme for British Members up to 2004 is run by Capita. It is run as an adjunct to the MPs’ scheme, except that it is contributory but not funded. In other words, the money is not invested. I have been either a manager or a chair of managers of that scheme ever since 1979. I then became chair of the European Parliament’s scheme. I have found that there has been complete obfuscation between the Civil Service and Capita as to what we can be told. My plea to the Minister is to please ask for greater transparency. I find it completely unacceptable that I can read the obituary of a colleague in the paper and then be told by Capita that it is information protected by GDPR—it cannot tell me who has died, even though I can tell Capita. Will the Minister try to get some greater clarity, so that the present managers—there are only seven of them—can at least find out who their pensioners are, whether they are still alive and any other salient facts? It is just not acceptable.

I thank the noble Lord. One of the reasons I love being a Member of your Lordships’ House is that every day is a history lesson, including about history that happened before I was born—I say that just to make me feel better. The noble Lord raises an important point about transparency. He will be aware that I am the Minister with responsibility for standards, so how could I do anything other than make sure that my officials meet him to try to get him the answers he is looking for?

My Lords, as a previous Pensions Minister, I am aware of how difficult it is to persuade young people in particular to make proper pensions provision. The danger of a scandal such as this, caused by Capita, is that confidence in the pensions system is undermined. Can my noble friend the Minister assure me that government campaigns to make people aware of the importance of proper pensions provision will continue, and in fact be redoubled, perhaps in conjunction with the trade unions, who I am sure she meets on a regular basis?

I thank my noble friend. She is absolutely right. It is incredibly important that the failure that we are currently discussing and wider concerns about how our pensions operate are not seen as suggesting to younger people, especially, that they should not sign up to pension schemes. It is deferred salary and they are entitled to it; it is part of their overall package. I was reflecting today with my private office—all of whom make me feel very old, hence my previous comment—on the fact that we are trying to fix their pension scheme. The first thing I did when I started working for my trade union, which is now Unite, was to write a guide for our members to the NHS pension scheme. The unions fulfil an exceptionally important role in making sure that people have access to their full terms and conditions. As for the problems that we are currently experiencing with this scheme, our officials are meeting every week with the FDA, PCS and Prospect to make sure that the workforce is fully engaged.

My Lords, I declare an interest as a Civil Service pensioner, though one with the reassurance that existing pensioners are not affected. I welcome that interest is being paid on late payments, and that is compensation for other damage. However, what assurance can the Minister give that the payments that are due will not be delayed by endless processes—legal processes and others—that will stop people getting what they now really deserve and need?

The noble Lord is absolutely right. There is zero excuse for not getting this money to people as quickly as possible. We have all read about this and had people directly approach us. I appreciate that many former members of the Civil Service will undoubtedly have had colleagues who have just retired approach them about the impact this is having on their lives. We need the money out the door as quickly as possible and the pension scheme stabilised at the earliest opportunity.

My Lords, the Minister, who has been incredibly helpful in relation to this, has said that £9.9 million so far has been withheld from Capita as a result of this absolutely dreadful scandal. Will the Minister give us an approximate amount of money that Capita has received, gross, from the Government since November 2023, when this contract was entered into? My fear is that £9.9 million withheld is absolutely nothing, and that is why little is happening.

My noble and learned friend is right. I do not have that information in front of me because this is a combination of government contracts and public service contracts, but while the £9.9 million is a first stepping stone for not meeting the milestones that it promised us, the noble and learned Lord may be interested to look at the profits warnings that Capita issued this week.

My Lords, does the Minister agree that the most important thing is for those people who are waiting to get their pensions now? Everything else, such as the compensation, can be dealt with afterwards. It is about the people who are waiting now. As a public sector worker of almost 43 years, I am fortunately not in the Civil Service Pension Scheme, but am in the local government scheme, and I had my pension within four weeks. Maybe there are some lessons to be learned, which could help the Civil Service, by looking at what other pension schemes do.

I would never disagree with my noble friend—she scares me on a good day—because she is a fabulous trade union official who has fought her members’ corner for a long time. She is absolutely right. When I have been at the Dispatch Box discussing these issues, I have been asked many times about how we got here, what is happening next and what is going to happen to Capita. Those are all valid questions that need to be answered, but the priority must be to get the money out the door, especially to those who have faced bereavement and ill health retirement. It is the very least we owe them.

My Lords, this is plainly an extremely unhappy matter, above all for the civil servants affected, and I do not claim to be an expert on it. Is the fault all Capita’s? Was there not a very troubling two-year handover from the previous administrator and does the Cabinet Office not have to bear some responsibility for managing this transition? Does the Minister accept that, when this is over, there needs to be an independent eye to look at this and to learn the lessons?

The noble Lord is right. The contract was signed and we received assurances. In response to the NAO report, we met Capita and went through a clear plan. There was a much larger backlog than was anticipated that came over from MyCSP, and the technological failures at that point meant that what we thought was going to happen has not happened, and the promises that were made since then have not been kept. However, the noble Lord raises an important point. That is why the Cabinet Office is now conducting an evidence-led review into how this failure arose, to make sure that all future contracts learn these lessons.