Was Capita’s Royal Mail pension contract a botch too far?
The federal government’s determination to terminate Capita’s Royal Mail pension contract uncovered its error of judgement in relation to the botched civil service pension contract.
The Cupboard Workplace stated it terminated Capita’s contract to manage the Royal Mail pension due to the outsourcing large’s “failure to fulfill key supply milestones”.
However this raises questions over Capita not assembly the identical destiny in relation to its botched takeover of the Civil Service Pension Scheme (CSPS).
In relation to the Royal Mail pension contract termination, Cupboard Workplace minister Nick Thomas-Symonds went additional.
“Capita had an 18-month planning window to arrange for the transition,” he stated. “They did not ship quite a few milestones, together with a failure to implement the required IT automation.
“The Cupboard Workplace repeatedly flagged delays in transition milestones,” stated Thomas-Symonds.
The federal government had alternatives to be as decisive in relation to Capita’s takeover of the CSPS, however was not.
Seen it earlier than
Again in October 2025, when the Public Accounts Committee (PAC) warned the federal government about the exact same “missed milestone” points in relation to Capita’s CSPS administration, it took a distinct strategy.
The report cited the missed IT milestones as considerations, amongst different issues.
On the time of the report, MPs stated Capita had solely delivered one out of eight transition milestones on time, and that the Cupboard Workplace had withheld £9.6m in funds.
“The Cupboard Workplace acknowledged that delays to key deliverables had been a big concern, although famous that every milestone has a spread of labor packages that sit beneath it, and subsequently specializing in the completion of the entire milestone most likely belies how a lot work has truly occurred,” stated the PAC.
“It advised us that it believed Capita had underestimated the complexity of the transition and the size of time it might take to implement the expertise, and that it was working with Capita to supply a brand new supply plan with practical dates.”
A few months in a while 1 December, Capita took over the pension scheme from MyCSP in step with the £239m contract awarded in 2023.
However by January this 12 months, an HMRC troubleshooter needed to step in to guide an “pressing restoration plan”, amid difficulties following the switch.
Issues continued with big delays in offering pensions, leaving many scheme members in monetary misery, together with folks with no different supply of earnings receiving no pension.
Keep on regardless
The PCS union final week known as for Capita to have its CSPS administration contract cancelled in the identical method because it has on the Royal Mail pension scheme.
Capita has retained the contract, not like the Royal Mail pension deal.
Royal Mail statutory scheme contract has annual revenues of lower than £10m, in accordance with Capita. The corporate, which has administered the scheme since 2018, stated it “will proceed to work carefully with all events to make sure continuity and a easy handover in step with the Cupboard Workplace’s future different preparations”.
In keeping with figures from Tussell, Capita at the moment has about 230 stay contracts with the general public sector, value £7.7bn. Its newest win is the decade-long Synergy Enterprise Course of Companies contract, which, in accordance with the official tender, has an estimated worth of round £959m over the interval. The contract helps back-office providers for the Division for Work and Pensions, Ministry of Justice, House Workplace, and the Division for Setting, Meals and Rural Affairs.
One IT outsourcing skilled advised Laptop Weekly final month that questions must be requested as to how Capita’s reported failures have affected selections round authorities contracts.
“The federal government has demonstrated a failure in procurement when it comes to managing them,” they stated. “Again and again, it has demonstrated its ineptitude.”
The removing of Capita from the Royal Mail pension contract could possibly be a defining second in UK public sector outsourcing. The issues skilled by Capita may make the dialog about delivering in-house simpler for division bosses.
Insourcing technique
Moreover, final month, Cupboard Workplace parliamentary secretary Chris Ward stated “the age of outsourcing will finish”, and introduced plans to insource providers.
“For many years, successive governments have been, at greatest, ambivalent about whether or not public providers are delivered in-house,” he stated. “At worst, we’ve had outsourcing by default, with public providers hollowed out and bought off to the bottom bidder. That period ends at the moment.”
The federal government launched a Public Curiosity Take a look at, requiring all departments to evaluate whether or not a service will be delivered extra successfully in-house earlier than any outsourcing determination is made. This may apply to service contracts of £1m and above, masking over 95% of central authorities spend.
“All departments should additionally publish insourcing methods to make the largest wave of insourcing in a era a actuality,” stated Ward.
A not too long ago retired civil servant affected by the CSPS’s issues stated “the satan might be within the element” in the case of the proposed Public Curiosity Take a look at. “Will this prioritise high quality of service, or value? Outsourcing is no less than partially a response to the budgetary strain that departments have confronted, so it might be fascinating to know the Treasury,” they stated.
Past insourcing, there may be one other set of suppliers ready within the wings with their eyes on the general public sector.
Indian heritage firms like Tata Consultancy Companies (TCS) have been making headway in a sector the place they’ve been nearly non-existent in for many years.
TCS is rising its public sector base and is overtly discussing its technique to focus on enterprise there. Talking to Laptop Weekly in 2024 Amit Kapur, TCS’s UK nation head, stated there was “potential, paucity and motion” with “good engagement”.
Within the public sector, TCS has offers with the BBC, the NHS and Transport for London, and works with the Division for Work and Pensions.
It additionally has type in public sector pension administration, and really changed Capita in 2023 on the Division for Training’s scheme, which manages over two million academics’ pensions with a 10-year contract
Infosys, one other Indian heritage agency, was not too long ago chosen to ship an HR system to the NHS in a 15-year, £1.2bn deal. This elevated the provider’s UK public sector enterprise greater than 160 instances over.
Earlier than signing the deal, Infosys had simply £7.45m in lively UK public sector contracts, in accordance with figures from Tussell.
