CAPITA WARNS OF £40M PROFIT HIT FROM PENSION SCHEME FAILURES

Capita has announced an expected earnings impact of between £25 million and £40 million in 2026 owing to contract failures on the UK Civil Service pension scheme. The outsourcing company stated it is implementing measures to mitigate the impact, though underlying operating profits will nonetheless be reduced by the shortfall. Share prices in the group fell 18 per cent on Wednesday morning following the trading update, reaching their lowest level in nearly a year.

The firm administers a pension scheme with 1.7 million members and has faced significant delays in processing payments and retirement quotations. According to the Cabinet Office, more than 6,700 quotations for past retirement dates and 4,100 bereavement cases remained outstanding. Capita missed a June 30 deadline to deliver the terms of its £239 million pensions contract after failing to meet earlier targets, and the Government has withheld nearly £10 million in payments to the company for poor performance.

Adolfo Hernandez, chief executive, apologised to MPs during a Public Accounts Committee hearing on Wednesday, stating the service "has not been good enough". He said the scheme remains the firm's top priority and that Capita is working closely with the Cabinet Office to resolve issues. Paymaster General and Cabinet Office minister Nick Thomas-Symonds said the Government would recover "every single penny" from Capita and confirmed the Cabinet Office was applying sanctions to the company each month whilst a 140-strong civil service team works to clear the backlog.