The company says this division operates in an "increasingly competitive and highly regulated market" and is loss making.
Up to 350 jobs will be affected in Salisbury.
Following a detailed review, Capita says it has concluded that recovery for the Sipp operation – and other smaller parts of its insurance division – would take a long time and it needs to take steps to address this.
Subject to FCA approval, it will sell its insurance distribution assets to Markerstudy for an undisclosed sum and it will close its SIP (Self Invested Pensions) administration business based in Salisbury which is "sub-scale and therefore unviable."
These operations comprise approximately £47m of group revenue, says the company, and are anticipated to make a combined operating loss of £15m in 2013.
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As other areas of the group have performed strongly, profit before tax, net of these losses, is expected to remain in line with current market expectations, says Capita.
It estimates that the combined cash costs, net of tax, from the sale and closure will be about £35m and this will be disclosed in its Preliminary Accounts for the year ended 31 December 2013.
The company admits the closure is "disappointing" but points out that the SIP division and other insurance arms generated healthy profits and cash over several years.
Overall, in its latest trading update the company says that it is on track to deliver strong growth in 2013 and 2014 has the foundations in place to be a highly successful year.