Capita takes up to £40m hit amid pension scheme debacle

The company admitted its service had “not been good enough” as members faced significant delays

Capita expects issues surrounding its Civil Service Pension Scheme contract to impact adjusted operating profit by between £25m and £40m in 2026.

The update comes days after a ministerial statement from the Paymaster General regarding Capita’s administration of the Civil Service Pension Scheme contract.

The Government has already withheld £9.9m in payments linked to the agreement and said it will recover the cost of deploying additional civil servants to help tackle a backlog of pension cases.

Ministers have also indicated they will examine longer-term options for the scheme's administration.

The firm acknowledged that its service had “not been good enough” particularly for members waiting on bereavement, retirement and quotation cases.

It said it is working with the Cabinet Office to resolve the operational issues and has put processes, automation and technology in place to tackle the backlog.

In January, The Guardian reported on cases of newly retired civil servants being unable to access pension payments on time, leaving some struggling to cover basic living costs.

Capita noted that its focus on the arrangement is affecting services elsewhere in its pension business, including its higher-margin pension consulting operations, while cost efficiencies have not been delivered in line with previous assumptions.

The company is reportedly taking mitigating actions across the wider group to offset some of the impact.

“We recognise the service on Civil Service Pension Scheme has not been good enough, we are working closely with the Cabinet Office on all aspects of the scheme, and this remains our number one priority,” said Capita CEO Adolfo Hernandez.

“The wider Group continues to perform robustly, and we are confident in the actions we are taking to build a simpler, more focused Capita.”

The warning comes despite Capita reporting adjusted revenue growth of 1.6 per cent to £906.5m during the first six months of 2026.

Public service earnings increased 2.4 per cent, while pension solutions leapt 24.7 per cent.

The company secured £998m in total contract value during H1, up 15 per cent year-on-year and representing public service’s strongest first-half sales performance since 2021.

New wins included the Synergy Business Process Services contract, which is set to begin in summer 2027 and a new agreement with a client in the Defence & National Preparedness vertical.

It also has secured new agreements across the past 12 months.

In March, it won a £17m extension with Staffordshire County Council and a £370m contract with the Department for Work and Pensions, the Ministry of Justice, the Home Office and the Department for Environment, Food and Rural Affairs.

In January, it landed a £9m arrangement with Kent County Council to deliver contact centre services supporting 1.6 million residents.

In November, the firm bagged a three-year renewal with Hart District Council, Havant Borough Council, South Oxfordshire District Council and Vale of White Horse District Council.

Moving forward, the firm expects public service revenue and adjusted operating profit to remain flat year-on-year.

“We have made good progress in the first half, with strong momentum in contract extensions and wins, and taking further steps to simplify the Group,” Hernandez added.

“We are also advancing the use of technology and AI to improve delivery for clients.”

Capita said the separation of its private sector contact centre business, which it exited in March for £1, is progressing well, with the disposal expected to complete ahead of its half-year results on 4 August.

The company has already taken action to deliver £8m in annualised cost savings as it targets £40m by the end of 2027.