Capita has warned that the cost of fixing the beleaguered civil service pension scheme could wipe up to £40m off its annual profits, as the outsourcing firm continues to face scrutiny over months of delays that left thousands of newly retired workers without income.
In a stock exchange update, the company said it expected to incur additional staff costs and penalty charges of between £25m and £40m as it works to restore service levels. Shares in the firm fell by nearly 21% following the announcement, a day after chief executive Adolfo Hernandez apologised to MPs for what he called a “very poor service”.
More than 6,700 quotations for past retirement dates and 4,100 bereavement cases remained outstanding at the end of last month. The government has already withheld nearly £10m from Capita due to service shortfalls, and ministers have vowed to recover “every single penny of cost” from the company, according to paymaster general Nick Thomas-Symonds.
An HM Revenue & Customs taskforce, led by deputy chief executive Angela MacDonald, has been brought in to clear the backlog at a cost of £12.5m. Meanwhile, the government has offered interest-free hardship loans to affected members, with £15.6m lent to 2,700 people awaiting payments. A Labour member of the public accounts committee, Catherine McKinnell, told a hearing that a terminally ill pensioner had died at the weekend still waiting for a pension quotation they had requested in January.
Capita executives said the scheme, which has 1.7 million members, had extremely complex rules and was being slowed by missing data. Richard Holroyd, chief executive of Capita's public service division, said he had considered resigning but decided not to because it would leave colleagues without support. He acknowledged the company was making a loss on the contract, but said: “We can’t think about profitability … this is about restoring the service and rebuilding trust.”
