700,000 retired civil servants could have their pension payments interrupted by a failing £239m Labour Party government contract, a trade union has warned.

Capita was planning to assume control of the Civil Service pension scheme in December after sealing a 10-year deal. But the Cabinet Office has now confirmed that the takeover date remains in limbo.

Fran Heathcote, PCS’s general secretary, previously told The Telegraph newspaper that “shocking failures” under MyCSP had put the scheme at risk of collapse and called for it to be brought in-house.

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Responding to the latest developments, she said: “It’s clear there are major potential issues with the transfer.

“These could well result in delays to current pension payments, delays to pensions payments due to begin, further delays in actioning the McCloud pensions remedy judgment, delays in calculating redundancy and exit payments, delays in responding to scheme members’ queries, and problems for members trying to access the IT portal.

“We resolutely believe that the only safe option for a pension scheme covering 1.7 million scheme members is to bring the physical administration of the work back in-house, under direct ministerial control.”

Sir Geoffrey Clifton-Brown MP, the Public Accounts Committee’s chairman, said: “It is deeply frustrating for this committee to be scrutinising an issue that ought to be as seamlessly run as civil service pensions.

“Scheme members who have dedicated their careers to public service ought to be secure in the knowledge that it is under sound administration.”

Adnan Malik, of Barings Law, said it could be “one of the biggest data breaches this country has ever experienced” and confirmed his firm was taking legal action for over 8,000 victims.

Responding to the PAC’s findings, a Capita spokesman said: “This report presents a snapshot from several months ago and is not reflective of the current status of the transition.

“Capita is preparing to take on administration of the Civil Service Pensions Scheme from Dec 1 2025, working with the Cabinet Office to support a successful transition. We are proud to have been selected to deliver such a vital service, supporting over 1.5 million current and former public servants.”

A Cabinet Office spokesman said: “We have re-procured the contract for Civil Service pensions administration, adding additional commercial measures so we maintain the strongest levers and controls over the performance of the service to members moving forward.

“We are working closely with Capita to ensure a successful transition, but have always been clear that a final decision will need to be taken ahead of the scheduled transition date.”