Capita’s deal to administer the new Royal Mail statutory pension scheme has been cancelled, Cabinet Office Minister Nick Thomas‑Symonds announced in Parliament on Wednesday.
The announcement comes after it “failed to deliver numerous milestones”, according to the official.
He told the Commons that ministers would “not hesitate to act decisively” to safeguard public servants’ pensions, stressing that reliability and accountability were essential.
He said Capita had missed key transition deadlines, including required IT automation, despite having an 18‑month planning window, and that repeated warnings from the Cabinet Office had gone unheeded.
It comes after thousands of retired civil servants were left without income in January 2026 after Capita took over administration of the Civil Service Pension Scheme and struggled to process payments.
The outsourcing company assumed responsibility for the £239million contract from MyCSP in December 2025, but encountered significant operational challenges shortly after the transition.
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Civil service pension delays continue months after Capita takeover leaves retirees unpaid
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Responsibility for pensions covering 1.7 million individuals spans multiple departments, including HM Revenue and Customs (HMRC), the Ministry of Defence (MoD) and the devolved Governments in Wales and Scotland.
More than three months after the disruption began, updated information on whether the backlog has been fully cleared and all affected pensioners have received their payments has not been made available.
Concerns remain given the financial hardship reported by individuals who were left waiting for money they had expected to receive promptly upon retirement.
Initial expectations around workload proved inaccurate, with Capita preparing for approximately 37,000 outstanding cases before discovering the true figure stood at 86,000.
Efforts to manage the shortfall included deploying more than 500 staff to the project, representing roughly double the workforce used by the previous administrator.
Operational issues were compounded by problems affecting the company’s online portal, which had been designed to allow members to track pension projections and lump sum payments
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Warnings about the transition had already been raised in October 2025 by Parliament’s Public Accounts Committee, which questioned whether adequate preparations had been made.
Sir Geoffrey Clifton-Brown, who chairs the committee, said it was "deeply frustrating" to be examining issues that "ought to be as seamlessly run as civil service pensions".
The impact on individuals has been significant, with some retirees reporting immediate financial strain after payments failed to arrive as scheduled.
Steve Duell, a 65-year-old from Hull who retired on January 1 after working for the Land Registry for four decades, said he faced the prospect of borrowing money to meet his financial commitments.
"We've got no money, and we've got lots of financial commitments," Mr Duell said.
"We need to pay off car loans and make mortgage payments," he added.
Plans for building work on his property had been arranged in anticipation of receiving a lump sum, which did not materialise, while he spent nearly 15 hours attempting to contact administrators by phone.
A spokesperson added that the company had been instructed to resolve issues as a priority, with assurances provided that targeted fixes were being implemented
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Paul McKenna, 59, from Liverpool, who took early retirement on health grounds following heart bypass surgery, said the situation had affected both his finances and wellbeing.
"I'm supposed to be getting married in September, but this has left me with lots of uncertainty," Mr McKenna said.
He also reported that stress linked to the missing payments had disrupted his sleep and aggravated his angina.
Union leaders have criticised the situation, with PCS general secretary Fran Heathcote describing it as "extremely distressing for those who have worked and paid into their pension all their working lives".