The Cabinet Office recently clarified its decision regarding the outsourcing of the Civil Service Pension Scheme administration. The choice to continue outsourcing the contract was based on a 2021 assessment which deemed it the “least risky” option.
Background of the Outsourcing Decision
In a letter shared with Members of Parliament, Cat Little, the permanent secretary of the Cabinet Office, summarized the decision-making process. The contract, awarded to Capita in November 2023, is part of a continuation of services following a thorough analysis conducted in 2021.
Assessment and Analysis
According to Little, the outsourcing decision stemmed from a Delivery Model Assessment in alignment with the Sourcing Playbook. This included:
- A comprehensive evaluation of insourcing options.
- A cost, risk, and benefits analysis.
This assessment indicated that outsourcing would provide the best opportunity to achieve defined benefits with minimized risk. Consequently, a procurement process was initiated under the Public Contracts Regulations 2015, enhancing contract requirements significantly.
Contract Evaluation Process
During the tendering phase, bids were evaluated by two independent teams, focusing on:
- Technical assessments.
- Commercial evaluations based on price and value for money.
Capita emerged as the winning bidder following this evaluation methodology.
Capita’s Performance Metrics
Little provided an update on Capita’s performance across various government contracts. In the second quarter of 2025-26, 90% of Key Performance Indicator (KPI) metrics were rated as ‘Good,’ with 5% classified as ‘Inadequate.’ The inadequate ratings primarily concerned the Recruitment Partnering Programme and the Teacher’s Pensions Scheme.
Specific to the Civil Service Pension Scheme, the contract includes 21 KPIs, requiring service credits. Little noted that while Capita has not provided satisfactory management information, available data suggests that the majority of KPIs have not been met.
Transition Milestones and Financial Assistance
The transition for the Civil Service Pension Scheme is structured across 11 milestones along with a final Contract Performance Point (CPP) tied to performance standards. As of now:
- Seven milestones have been fully achieved.
- One milestone was only partially met.
- Three milestones remain unpaid, with the final CPP payment contingent upon meeting standards.
Additionally, as of March 10, 646 loans totaling £3.5 million have been distributed to individuals awaiting pension payments. The Cabinet Office is also developing a standardized mitigation letter to assist members facing temporary financial challenges, expected to be available shortly.
In light of ongoing scrutiny, the Cabinet Office aims to improve the situation and ensure all stakeholders are informed of the developments surrounding the Civil Service Pension Scheme administration.
