Capita has announced it expects to incur losses of up to £40 million related to its management of the UK civil service pension scheme. This revelation comes after the company's chief executive, Adolfo Hernandez, issued an apology for the 'very poor service' provided to retired civil servants, leaving many without income for months.
Capita's Apology and Financial Impact
During a recent Commons committee hearing, Hernandez acknowledged the significant delays in processing payments and retirement quotes for over 6,700 retired civil servants. The ongoing crisis has had a profound impact on those affected, with many struggling to cover basic living expenses.
As part of a stock exchange update, Capita detailed that the costs associated with rectifying these issues could reduce its annual profits by £25 million to £40 million. The company's shares dropped nearly 21% following the announcement, reflecting investor concern over the financial implications of this debacle.
Government Response and Backlog Issues
In response to the crisis, the government has withheld nearly £10 million from Capita due to service shortfalls. Nick Thomas-Symonds, the paymaster general, emphasized the government's commitment to recouping all costs associated with the failures, stating, "I will not have a situation where public money is funding corporate failing."
As of the end of last month, more than 4,100 bereavement cases were also pending resolution, which has further complicated the situation. The government has initiated interest-free 'hardship loans' for the most affected pensioners, lending a total of £15.6 million to approximately 2,700 individuals awaiting payments.
Challenges in Processing Pension Claims
Capita executives highlighted the complexity of the pension scheme, which serves 1.7 million members, as a contributing factor to the delays. Missing data has exacerbated the processing times, hindering the company's ability to meet its obligations.
Hernandez reaffirmed that improving service levels remains Capita's top priority. The company is working closely with the Cabinet Office to address the issues and restore trust among civil servants. Richard Holroyd, chief executive of Capita's public service division, noted that despite the financial losses, the focus must be on service restoration rather than profitability.
- Expected losses: £25 million to £40 million
- Outstanding quotations: 6,700
- Outstanding bereavement cases: 4,100
- Government withheld funds: £10 million
- Hardship loans provided: £15.6 million
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