If NEST’s web services are “free” – who’s picking up the tab?



Employers who choose NEST will be able to onboard directly from payroll assuming payroll holds the information NEST needs to set-up.

As with most things NEST do , the announcement this week that they have created a suite of web based links to allow employers to go “straight to NEST” made me happy and sad at the same time.

I’m happy that this is being done, it is what we are all doing, but I’m sorry that NEST are doing this on their own.

NEST were asked to join the PAPDIS initiative and integrate with the common data standard organised by Pensions BIB.

They chose not to and by ignoring the PAPDIS data standard and by not working with other providers, NEST is setting itself against, not working with – the rest of the market.


Better to work with than against

It may be that this announcement is as a result of work that was initiated before PAPDIS was conceived and part of a masterplan conceived at NEST’s outset. Or it may be that this is response to the problems of on-boarding they experienced in the first stage of auto-enrolment, but either way, NEST has rather sprung this on the market in a way that suggests it is more interested in getting market share, than easing the capacity crunch.

If NEST is trying to reclaim its hegemony over the 1m + decisions from SMEs and micros on which workplace pension to use, it is open to further charges of “market distortion”. If it is simply encouraging innovation in the private sector, it should be ensuring that it is linking to sites offering choice such as Financial SatNav, Pension PlayPen and Defaqto.

I speak here as Chair of the FofAE  Choices Taskforce as well as founder of Pension PlayPen. I quote the Pension Regulator’s website

It is important that the scheme you choose is well run, offers good value for money for you and your staff and that it will work with the payroll process or software you’re using, so allow plenty of time to make sure you make the right choice. Your pension provider will need certain information about the staff you’re automatically enrolling so it can set up membership of the scheme for them.

Your staff will probably have heard of automatic enrolment and may want to know more. If you haven’t done so already, now would be a good time to provide them with information. Use our raising awareness resources link below.

This does not read “GO STRAIGHT TO NEST”.


So what are NEST actually saying?

Here is the body of the press release –

‘We listened to payroll software developers and understand that the payroll process, whether managed by the employer or their adviser, is crucial to auto enrolment’s continued success. It holds all the vital information for worker assessments and contributions. Rather than duplicate work for employers, we have integrated the two processes, reducing time and complexity.’


‘NEST has been set up to support the roll-out of auto enrolment and to be ready to work at scale. NEST Web Services is a part of helping ensure we are ready for the next stages. With thousands of SMEs being brought into auto enrolment in the coming years, we need to make sure that the industry continues to innovate in order to help employers meet their duties.’


The new NEST Web Services capabilities make employer auto enrolment processes faster and more streamlined. NEST Web Services is fully flexible. Payroll developers can choose to build one or all 9 web services. NEST Web Services can be used to:


1.   Set up a new employer

Other than accepting NEST’s terms and conditions and setting up payment data, all other parts of the set-up process can be completed automatically through the payroll system.


2.   Retrieve current set-up details

Retrieves employer set-up data to ensure that data in NEST and the payroll software match.

3.   Enrol workers

Sends all worker enrolment data direct to NEST via payroll software.


4.   Update contributions

Sends NEST the earnings and contribution details for a particular contribution schedule. It will also be used to notify NEST where there won’t be contributions.


5.   Approve for payment

Sends NEST an employer’s confirmation that payment of a contribution schedule for an agreed amount will be made by the employer (Direct Credit or Debit Card) or can be collected by NEST (Direct Debit).


6.   Retrieve schedules

Retrieves a list of due and overdue contribution schedules, and their current status, from NEST.


7.   Retrieve opt-outs

Retrieves a list of members who have opted out within a selected date range from NEST.


8.   Retrieve stopped contributions

Retrieves a list of members who have instructed NEST they wish to stop contributing, within a selected date range.


9.   Retrieve refunds.

Retrieves a list of refunds made to an employer’s refund bank account from NEST.


Payroll providers who want to adopt NEST Web Services can request the technical specification from the NEST website.  NEST will also be providing a testing platform for payroll software providers to use, free of charge.


But is it really free of charge?

We must remember that the commercial advantage it is gaining in adopting this approach results from the almost unlimited development budget it has been given by the DWP. It is disappointing that rather than work with other providers to ensure that choice is available, it has chosen to go it alone- effectively snubbing Pension BIB and its Papdis initiative.

When we set out on this journey in 2010, many of us expected NEST to be the last provider standing as we faced 2016.

It isn’t; and despite the enormous loan from the DWP, it is not the obvious choice for all employers. We (pensionplaypen.com ) variously rate it top second or third best provider but for some employers NEST is totally inappropriate. 

My worry is that many employers will find it all too easy to use NEST, it is important that other providers catch up with NEST by adopting these protocols. Unlike NEST, the private sector has to do this itself – out of shareholder funds. 

Before we get carried away with NEST, we should remember that it’s debt to the DWP (thought to be north of £400m) cannot be written off. It is public money and has to be factored into ay decision to use NEST . NEST is – after all – considered to be a commercial provider competing on a level playing field.

Many SMEs and micros understand this and observe the well coined dictum “if it looks too good to be true – it probably is”.

Someone has to pay back the £400m, some of which is attributable to this “free software”. In a world where things have to be paid for, the only candidates are

1. The taxpayer- by quietly writing off the debt.

2. The employer who ends up having to pay for development costs through direct fees from NEST

3. The member- through the NEST charging structure.

We cannot really plan around a debt write off, we have to plan around 2 and 3. At a recent meeting on CDC, someone made the  point that nobody but a fool would invest in a CDC scheme that was underfunded, they would simply be buying into under-performance.

My challenge to NEST is the same. Why would I want my, my clients or my staff’s money invested into a trust whose sponsor owes £400m?

More specifically, if these services are free, who is paying for them?



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in NEST, Payroll, pension playpen, pensions, trustee and tagged , , , , , , , , , , . Bookmark the permalink.

Leave a Reply