Capita has issued an apology after a government minister and MPs condemned its 'dreadful' running of the civil service pension scheme.

In a scandalous service meltdown reported by This is Money and Money Mail, pensioners and bereaved families have faced hardship after being deprived of incomes for months.

The outsourcing giant broke its promise to fix the problems by June 30, and there is still a backlog of nearly 11,000 cases, Paymaster General Nick Thomas-Symonds told the House of Commons yesterday.

He said that includes 4,100 bereavement cases on which Capita could take action, adding: 'These are the most harrowing stories, affecting devastated scheme members and grieving families.'

Capita, which took over the civil service pension scheme from previous administrator MyCSP last December, responded today: 'We continue to work at pace to resolve the operational issues in collaboration with the Cabinet Office.

'Despite the progress made to date, we recognise the service has not been good enough, particularly for members waiting on bereavement, retirement and quotation cases and we are sorry for the distress and inconvenience experienced by those members.

'We now have the processes, automation and technology in place to work through the backlog.

'Capita is assessing the implications of the matters contained in the statement [by Thomas-Symonds] and, if required, will update the market as soon as it is able to do so.'

Shares in the outsourcing firm plunged by 10 per cent to 290p.  

We have reported on a string of cases, including former prison officer Jason Gould whose plans with his wife to retire to Spain were nearly scuppered, as they were thrust into rent arrears and could not afford to pay off debts.

We also covered the case of bereaved mother Teresa Cook, who could not settle the financial affairs of her late daughter, who was a civil servant for more than two decades.

In February, Capita bosses got a pasting from MPs at a public accounts committee meeting we attended at Westminster over 'heartbreaking' cases of hardship.

The company's bosses are due in front of MPs on Wednesday at a joint session of the public accounts committee and the public administration and constitutional affairs committee.

In a notice issued by the two committees in advance, they said: 'Thousands of loyal and dedicated civil servants, and their families, are having difficulties drawing on and collecting their pensions.

'In response, the government has confirmed that interest-free 'hardship loans' of up to £10,000 will be offered to the thousands of people experiencing financial hardship as a result of the failure.'

Thomas-Symonds, who is also set to appear at the committee hearing, told the House of Commons yesterday there would be 'immediate financial consequences' and the government had 'already hit Capita's bottom line by withholding £9.9million in payments'.

'Capita was awarded this contract in November 2023,' he said: 'It had two years of transition to prepare, and its senior leadership gave me explicit personal assurances ahead of the handover that they were fully capable of managing the workload and that they were ready for a successful transition.

'Indeed, the chief executive promised that technological improvements would create a flagship use case for the largest AI-enabled pension scheme in the country. 

'It is clear that non-delivery of technology has been a fundamental part of Capita's inability to deliver.

'The reality is that it was completely unprepared and its system was overwhelmed, which resulted in a backlog that skyrocketed to a staggering 120,000 unresolved cases.'

The Paymaster General said Capita had missed an end of April target to clear inherited arrears, and an end of June milestone when the firm had promised 'a complete return to standard contractually required levels'.

He added: 'What progress has been achieved is due to the significant additional capability provided by the Cabinet Office pensions recovery taskforce, and a team of more than 140 officials whom I have 'surged' into the process.

'Let me also say that public money will not fund Capita's failings. We will recover every single penny of these surge costs directly from Capita, and I will not remove a single member of the team until the service is permanently fixed and fully restored.'

Conservative Shadow Minister Mike Wood responded: 'Nobody in this House should be in any doubt about the anxiety and hardship being felt by retired public servants and the grieving families left stranded by this operational collapse.

'These are not mere statistics; they represent vulnerable individuals who have been left facing severe financial distress.'

He added: 'The Minister can look backwards to November 2023 all he likes, but the critical transition phase, the data quality integration and the system go-live occurred on this Government's watch and, more specifically, on his watch. The timeline of unheeded warnings is damning.'

Have you been hit by the backlog? editor@thisismoney.co.uk