Capita renews Royal Mail pension scheme contract

Capita has renewed its contract with the Cabinet Office to administer the Royal Mail Statutory Pension Scheme (RMSPS) for six years, starting in 2026 and with a potential two-year extension. 

In a deal worth £48million over eight years, Capita said it would continue to serve over 350,000 RMSPS members while migrating services to a single platform using Microsoft Dynamics and other technologies. 

London-listed Capita had been administering the RMSPS since 2017, providing services such as finance, accounting, pension payroll and data management. 

Deal: Capita has renewed its contract with the Cabinet Office to administer the Royal Mail Statutory Pension Scheme

Capita shares were flat at 13.24p on Wednesday, having fallen over 50 per cent in the last year. 

Adolfo Hernandez, Capita’s chief executive, said: ‘This renewed contract reflects not only our long-standing and established strategic partnership with the Cabinet Office, but also the quality of the service we provide to members. 

‘We are exceptionally proud to continue to deliver this vital work.’

In March, Capita, which operates London’s Ultra Low Emission Zone, earmarked an additional £100million of annual spending cuts, as the group’s new boss vowed to boost its competitive edge after swinging to a loss. 

In November, the group announced 900 job cuts.

The group posted a loss of £106.6million for 2023, down from a £61.4million profit the prior year and ‘reflecting business exits, cost reduction programme expenses and 2023 cyber incident costs’. 

Capita’s cyber saga saw it incur net costs of £25million, comprising, among other costs, specialist professional fees and recovery and remediation costs.

Last month, Capita, which also runs the collection of BBC licence fees, unveiled strategic plans to focus on its core segments as it aims to bolster its financial performance and cash generation.  

The group will start focusing on its public services, contact centres and pension solutions businesses. It will restructure the organisation to reduce costs, drive efficiency and cash flow.

Capita expects its operating profit margins to improve to between 6 per cent to 8 per cent over the medium-term, and free cash-flow generation from 2025 onwards.