The Scottish Public Pensions Agency (SPPA), which looks after pensions for more than half a million public sector scheme members, will require £9.8m in extra funds from the Scottish government due to an IT blunder.
According to a report submitted to the Scottish Parliament by the Auditor General, the SPPA will need additional revenue and capital budget allocations over the next five years, after a failed IT project awarded to Capita in 2015.
The agency's main role is to administer and pay the pensions deferred members and pensioners of the NHS, teachers', police and firefighters' pension schemes in Scotland.
It also provides policy support to the Scottish Government and local government pension schemes.
SPPA awarded a £5.6m contract to Capita to deliver a bespoke unified pensions administration and payment system, with the goal to replace existing systems to improve business efficiency, improve service quality for members, and make financial savings in the longer term.
The new system was to be operational by March 2017, which never happened, and it was cancelled in February.
Together with their legal advisers, SPPA and Capita are now in discussions to establish if either party bears any responsibility for the unsuccessful implementation of the project, the report stated.
The closure of the project means that the pensions agency won't be able to achieve its planned annual efficiency savings.
As a result, SPPA has forecast significant budget gaps and estimates that it requires additional revenue budget of £9.8m between 2019 to 2020 and 2022 to 2023.
The agency also estimates it needs a total capital allocation of £18.4m from the Scottish government over the next five years to deliver a replacement project.
In the meantime, SPPA extended the contract with its existing pension administration software supplier, which will also be tasked to deliver an improvement programme. This agreement will run to March 2024.
The auditor general intends to prepare a more detailed report in 2019 once any legal process between SPPA and Capita has concluded.
In a statement issued on Friday (5 October), SPPA guaranteed that pensions will continue to be paid on time and that the agency will continue to support scheme members appropriately.
“There is no change in the service that SPPA provide and we will continue to put the customers' needs at the heart of our service delivery and work on business solutions to enhance the customer experience,” it stated.