National Audit Office launches fresh probe into Capita over civil service pension chaos affecting 1.7 million members

From the Newshound archive · first published 2 October 2026 · last updated 3 October 2026.

The spending watchdog has opened a fresh formal inquiry into outsourcing group Capita and its management of the Civil Service Pension Scheme, broadening the scope of work begun in June 2025. Capita acknowledges that its performance 'remains below the standards that scheme members and the Government rightly expect', despite a government recovery plan imposed earlier in the year. The contract failures are expected to cost the firm as much as £40 million in profit, with a backlog that had swollen to more than 120,000 cases by February.

Pensioners, bereaved families and those seeking death-in-service payments endured delays lasting months after Capita assumed responsibility for the 1.7 million-member scheme last December.

Close to £10 million in payments were withheld by the government once Capita failed to meet its June 30 deadline for restoring the service, and ministers have not ruled out stripping the firm of the £239 million contract.

The backlog fell disproportionately on vulnerable groups, triggering parliamentary questions about whether Capita had sufficient capacity to administer the scheme before it ever took it on.