UK Government Admits Civil Service Pension Scheme Outsourcing Failed, Causing Hardship

Retired civil servants have been failed by the decision to outsource their pension scheme, the government has admitted, and the maladministration meant some were left waiting up to a year for payments.

Multiple members of the civil service pension scheme, run by the private company Capita since December, have come forward to say they are unable to afford rent and have been forced to use food banks after being left without an income.

An estimated 17,000 relatives of deceased claimants are also facing financial hardship as chaos at the scheme leads to delays in payments to them.

The Cabinet Office has confirmed it is looking to take the scheme back in-house following “unacceptable” service levels.

The Guardian first flagged concerns in December last year and MPs have repeatedly warned that Capita, which was already facing a backlog of cases when it took on the scheme from another private company - MyCSP, part of Equiniti - was ill-equipped for the scale of the task.

The Guardian can reveal that among those struggling to get their money are a 98-year-old, who may require a bailout from her sons, and a young widow forced to claim universal credit to support herself and her daughter.

The 98-year-old, who does not wish to be named, applied to the scheme when her husband, a retired civil servant, died last December.

“It took three months just to establish what application forms CSPS [the civil service pension scheme] required and get the information to them in a form they would accept,” said her son, Nick Hitch.

“My mother has very few savings left and if CSPS continue to delay, my brother and I will have to support her financially within weeks. It is causing her a lot of worry, and stress is dangerous when you are 98.”

After the Guardian contacted Capita the claimant began to receive her payments, along with a lump sum for arrears.

Sarah Colhill has been forced to claim universal credit because of delays in processing the £86,000 lump sum death-in-service benefit due to her after her 57-year-old husband died last October. She is the sole carer for her disabled daughter and is living off her late husband’s pension of £110 a month.

“Nine months on, Capita now say they won’t release the money without a letter of administration, despite the fact they are already paying me my husband’s pension and had told me in February that they had all the paperwork they needed,” she said. “As a direct result of these delays, I have been left in significant financial hardship and can no longer afford my rent.”

Capita was awarded the £239m contract by the Cabinet Office, despite having been stripped of its contracts to run Teachers’ Pensions and the Royal Mail statutory pension scheme because of delays and backlogs.

A report by parliament’s public accounts committee had advised that the government should bring the scheme back in-house since Capita had missed key milestones during the two-year handover. It also accused the government of failing to intervene when service standards plummeted under the previous administrator, Equiniti.

The government said Capita had spent the transition period improving its technology and staffing levels and pressed ahead with the contract.

In January, the Cabinet Office said it was confident that Capita would deliver an improved service for pensioners and taxpayers. Six months on, it has conceded that the company repeatedly missed targets to improve its performance.

Earlier this month, the Cabinet Office minister, Nick Thomas-Symonds, told parliament the scheme could be a “prime candidate for insourcing in the future”.

In a statement, a Cabinet Office spokesperson confirmed the move: “Capita has failed to meet their critical end of June deadline [to meet agreed service standards], repeatedly missing recovery targets and delivering a service that is completely unacceptable to both members and taxpayers.

“This government is now drawing a line in the sand. While we will continue to apply robust commercial levers, including withholding payments, to hold them firmly to account, we are looking beyond short-term fixes. We have set out our intention to advance the biggest wave of insourcing in a generation, and we are now actively shaping a long-term strategy to bring this pension scheme back in-house.”

The maladministration has caused financial and emotional hardship to thousands, according to the Public and Commercial Services Union.

“Capita has missed deadline after deadline, yet civil servants and pension scheme members continue to pay the price for those failures,” said the union’s general secretary, Fran Heathcote. “Behind every delayed case is a real person dealing with uncertainty, stress and financial worry.”

Sally McEnhill and Christine Chalker lost their husbands last November and immediately submitted claims for their pension entitlements. Five months later, both were still waiting for confirmation of their entitlements.

“Each time I called I was told delays were due to ‘data migration’,” said Chalker. “Then, weeks after being assured that all the information was in the system, I was told that no forms had been received. I sent new forms but received no acknowledgment or update.

“Losing your partner is one of the most difficult experiences anyone can go through. The lack of clarity, communication and basic administrative handling from CSPS has made it considerably worse.”

McEnhill began receiving her pension, worth £2,500 a month, as soon as the Guardian contacted Capita; but, two months on, Chalker is still waiting for an update.

Capita said it could not comment on individual cases. It said it had inherited a backlog of 90,000 cases from Equiniti and was working “at pace” to resolve them.

“Despite the progress made to date, 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 experienced by those members,” said a spokesperson. “We now have the processes, automation and technology in place to work through the backlog.”

A spokesperson for MyCSP said: “MyCSP completed a comprehensive handover of the pension scheme with the new provider which was overseen by the Cabinet Office. All outstanding work items were fully disclosed, discussed and reviewed with Cabinet Office senior management prior to commencement of the handover process.

“Throughout its tenure administering the scheme, MyCSP consistently met the service levels set by the Cabinet Office, as independently confirmed in the National Audit Office’s assessment of performance.”