Capita renews contract with Royal Mail pension scheme

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

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

London-listed Capita has been managing the RMSPS since 2017, providing services including finance, accounting, pension payroll and data management.

Capita shares held steady at 13.24p on Wednesday, having fallen more than 50 per cent over the past year.

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

“We are exceptionally proud to continue to carry out this vital work.”

In March, Capita, which operates London’s Ultra Low Emission Zone, earmarked an extra £100m for annual cost cuts, while the group’s new boss vowed to boost its competitive edge after falling into losses.

In November, the group announced 900 job cuts.

The group posted a loss of £106.6m for 2023, down from a profit of £61.4m the year before and “reflecting business exits, cost-cutting programme expenditure and cyber incident costs in 2023”.

The cyber saga resulted in net costs to Capita of £25m, including, among other costs, specialist professional fees and recovery and remediation costs.

Last month, Capita, which also manages the collection of BBC licence fees, unveiled strategic plans to focus on its core segments, with the aim of strengthening its financial performance and cash generation.

The group will begin to focus on its utilities, contact centre and pension solutions businesses. It will restructure the organisation to reduce costs, boost efficiency and cash flow.

Capita expects its operating profit margins to improve to between 6% and 8% over the medium term, with free cash flow generation to begin in 2025.