Labour awards £370m contract to company 'at centre of pensions crisis'

These include the Department for Work and Pensions (DWP), the Ministry of Justice, the Home Office and the Department for Environment, Food and Rural Affairs.

While the initial contract is valued at £370million, the DWP indicated the total cost could rise once optional services and additional provisions are included.

Reports suggest the final value of the agreement could approach £700million.

The decision has prompted criticism from trade unions, which say the contract raises concerns given Capita’s recent record delivering public sector services.

The outsourcing company has faced several high-profile difficulties linked to government contracts in recent years.

In January, Capita apologised after more than 8,000 retired civil servants experienced delays to their pension payments.

Some affected retirees reported struggling to meet mortgage and rent obligations as a result of the delays.

Government departments subsequently issued 540 emergency loans worth £2.9million to those impacted.

The company was also fined £14million in 2025 following a cyber attack that compromised more than six million records.

The breach exposed sensitive financial information, including bank account and credit card details.

Since 2023, Capita has also lost contracts with the Department for Education worth £414million.

The company’s 27-year role administering the Teachers’ Pension Scheme ended when Tata Consultancy Services secured a replacement contract worth £234million.

Administrative issues during that period resulted in some teachers receiving pension payments that were thousands of pounds below their correct entitlements.

The Public and Commercial Services union criticised the Government’s decision to award Capita the new contract.

Fran Heathcote, general secretary of the Public and Commercial Services union, said: "Capita is already at the centre of a pensions crisis that has left retired civil servants in distress."

She added: "Privatisation is failing, so why does the Government continue to reward those responsible with yet another massive public contract?"

Ms Heathcote warned the decision could affect the pay of hundreds of thousands of civil servants.

She said: "Ministers can see these crises unfolding in real time, yet they are prepared to place the pay of 250,000 serving staff at risk."

Kevin Brandstatter, a national officer at the GMB union, also criticised the decision.

Mr Brandstatter said Capita’s track record delivering government services was "nothing short of woeful".

He added that the publicly funded function "should never have been awarded to a private company", referring to the 2023 cyber breach that exposed records belonging to 6.6 million people.

The procurement process is also facing legal scrutiny.

Sopra Steria, the rival bidder that currently provides some of the services, has launched legal action over the decision.

The company claims the DWP failed to identify that Capita’s successful bid was "abnormally low".

A spokesman for Capita said: "We took part in a robust procurement process and stand ready to work with the DWP to ensure a smooth transition of service."

The spokesman added that the company’s "priority remains to ensure value for money for the public".

The DWP confirmed that a contract had been signed with Capita.

"We have signed a contract with Capita to deliver the Business Process Service and are committed to ensuring a smooth transition."

They added that "continuity of service and value for money for the public" remain key priorities for the department.