The government has terminated its Royal Mail pension scheme contract with Capita after citing failures to hit milestones. The announcement comes as Capita faces pressure in relation to the disruption to the Civil Service Pension Scheme (CSPS) since it took over administration in December.
Cabinet Office minster Nick Thomas-Symonds told MPs that the contract has been terminated because the outsourcing provider “failed to deliver numerous milestones”, adding: “Following a failure to meet critical transition milestones, and a lack of confidence in Capita’s ability to implement and transition to the new operating model in a timely fashion, I’m announcing today to the House that I have terminated the new Royal Mail statutory pension scheme contract with Capita.
“Capita had an 18-month planning window to prepare for the transition. They failed to deliver numerous milestones, including a failure to implement the required IT automation. The Cabinet Office repeatedly flagged delays in transition milestones.”
A Cabinet Office Spokesperson said: “We have terminated the contract with Capita for the Royal Mail Statutory Pension Scheme following their failure to meet key delivery milestones. There has been no disruption to service levels for members and we will ensure the programme continues to operate steadily as we transition to a new contract.”
Deja vu
The supplier has faced criticism this year following its takeover of the Civil Service Pension Scheme administration, which has seen thousands of former civil servants face financial hardship due to delays.
In 2023, the Cabinet Office awarded Capita a seven-year contract worth £239m for the administration of the CSPS, which has 1.7 million members. The takeover from the previous administrator, MyCSP, took place on 1 December 2025. In the following month, amid delays and problems, an HMRC troubleshooter was brought in to lead an “urgent recovery plan”.
In October last year, in the lead up to Capita’s takeover, a Public Accounts Committee (PAC) report said there was a “real risk” that supplier would not be ready to take over the administration scheme on time. The PAC report listed inadequate staff levels, unrealistic automation targets and missed IT milestones as concerns.
In February, during a Public Accounts Committee meeting, Capita told MPs that the delays were in part caused by the 16,000 unread emails and 20 million database errors it was left with when it took over the contract.
Facing MPs then, Chris Clements, managing director of Capita Public Services, was asked if the business process outsourcing company had been lied to about the backlog. He said: “We were surprised by the nature of the backlog on going live.”
But in a letter to MPs, Duncan Watson, CEO at MyCSP – which was set up as a private and government joint venture in 2012 – said the company has no record of the database errors that Capita mentioned in a PAC hearing, adding that the 16,000 unread emails highlighted by Capita were the result of a “blackout” period when MyCSP could log them but not act on them.
He added that Capita’s preparations for the contract switch, such as dress rehearsals, were inadequate: “The second key lesson is the critical importance of detailed and robust planning of the period leading up to and including ‘cutover’ to the new administrator.
“We do not believe that these activities were carried out to the level of detail and thoroughness required for such a major transition. As a result, the risks associated with not having a robust transition/cutover process in place were not fully understood or mitigated prior to transition.”
