This was going to be the largest AI-enabled pension operation in the UK.
That’s what Capita CEO Adolfo Hernandez told the Cabinet Office minister on 25 November 2025, when his firm took over 1.7 million pension. It was six days before go-live. One month earlier, the Public Accounts Committee had already warned about missed IT milestones on the same contract. Capita had dismissed it.
By January 2026, an HMRC troubleshooter had been parachuted in to run an “urgent recovery plan.” Capita promised to clear the backlog by the end of April, return to full contractual service by the end of June. It missed both. By July, MPs heard Capita is on track to fail 16 of its 21 headline KPIs. The government has withheld £9.9 million in payments, and pensioners are still waiting months for bereavement and retirement payments to clear.
What happened?
20 million missing records
“We’re talking about 20 million” missing records, Adolfo Hernandez told MPs.
That’s what Capita found when they finally looked. Not incomplete. Not outdated. Missing.
A pension scheme runs on records. Every payment, every bereavement claim, every retirement calculation depends on the system knowing who someone is, what they’re owed, and why. Twenty million gaps in that isn’t a rough edge to smooth out after go-live. It’s the foundation the entire “flagship AI-enabled” promise was supposed to stand on.
The backlog nobody had counted
The missing records weren’t the only surprise. Hernandez told MPs Capita inherited a case backlog “much higher than anyone expected.” It included cases up to four years old, some referencing government departments that no longer existed.
Twenty million missing records and the backlog “much higher than anyone expected” became clear, in Hernandez’s own account, after transfer — after Capita had already signed a seven-year, £239 million contract to run the scheme.
That raises an obvious question: how does a bidder not know the scale of what it’s inheriting before it wins a contract this size? Either the due diligence didn’t uncover it, or it did and the scale still came as a surprise once the work actually started. Neither answer is reassuring.
Two deadlines, missed twice
Capita made two public promises about fixing what it found. Clear the inherited arrears by the end of April. Return to full contractual service levels by the end of June.
It missed both. Minister Nick Thomas-Symonds told MPs plainly: Capita “missed its own April milestone,” and by June, “failed to meet that milestone, too.”
Cat Little, the Civil Service’s chief operating officer, told a joint committee this month that Capita is on track to fail 16 of its 21 headline KPIs. Her words on where this is heading: “This trend worsens and worsens, unless something radically shifts.”
What it costs
The government has withheld £9.9 million from Capita for failing the transition. Further monthly deductions are being taken for ongoing service failures, but the amounts haven’t been disclosed. Capita and the government can’t agree on the numbers, which is why an independent auditor has now been brought in to settle it.
Capita’s own trading update puts the hit at £25 million to £40 million off operating profit in 2026, and £35 million to £50 million off free cash flow.
Sir Geoffrey Clifton-Brown, chair of the Public Accounts Committee, told MPs that scheme members have been “left struggling to make ends meet at a pivotal point in their life.” Some are waiting on bereavement and retirement payments. Some, with no other income, have received no pension at all.
Hernandez apologised to members “receiving a very poor service at a very difficult time in their lives.” Cabinet Office minister Nick Thomas-Symonds put it more bluntly. He said he’d been personally let down. He said that if he could take the scheme back from Capita and run it inside government today, he would.
What ambition cost
Twenty million missing records isn’t an AI problem. It’s a data problem, and it would have sunk this scheme with or without a single algorithm attached. You can’t pay someone correctly if you don’t know who they are or what they’re owed.
Which makes Capita’s over-promise worse, not better. Capita didn’t just say AI would help. It told the government this would be “the largest AI-enabled pension scheme in the country,” on top of a foundation nobody had checked. The AI wasn’t the mistake. It was a claim resting on ground that hadn’t been tested.
Every CTO reading this has sat in a meeting where someone wanted to announce the exciting version of a programme before the boring version was working.
Capita’s pension scheme is what it looks like when nobody in that meeting says no.
Headshot source: https://www.capita.com/
