NEST – Lamborghini or Trabant?


Yesterday I wrote about NEST’s great steps towards an integrated approach to the management of auto-enrolment data.

I didn’t hear anyone else asking the question

“is NEST acting as a force for good or is it over-stepping the remit we , as its sponsors, have given it”.

I spent the rest of Sunday watching cricket with some good friends from various pension providers, all providing competitive pensions to NEST. By coincidence, the match was sponsored by Royal London, whose workplace pension is another market leader.

So I asked my friends what they thought.

The general consensus was that what NEST had done in developing a suite of web-based tools to help employers comply with auto-enrolment was the right thing.

But that it was a shame that they had done this work solo and not shared the development with other providers (through Pensions Bib and other industry initiatives).

Nobody knew how much NEST has paid to developers to establish these tools, but it seems likely that the cost could have been shared if we had adopted an industry wide approach to pension compliance.

My conclusion is that NEST is insufficiently accountable for its current actions so I’ll go on asking awkward questions , like…

Lamborghini or Trabant?

Undoubtedly NEST feel it is necessary to maintain a competitive advantage, but we wondered why?

No matter how hard the rest of the pension providers try to offer competition to NEST, there will always be a large part of the population of small employers who will choose NEST, whether NEST even were it the pension equivalent of a Trabant.

A Trabant – you may remember – was a mass produced Eastern European car that was the only choice for millions under the yoke of communist repression. NEST is not a Trabant, it is a very good pension scheme but so it should be – it has cost us £400m.

Personally I think that is a price worth paying. Without NEST, many of the large pension schemes run by mega-employers would have struggled to accomodate the 5m new workers now saving into workplace pensions. NEST has some 33% of all new members since auto-enrolment began in 2012.

NEST is a clearly recognisable brand and, most importantly, it is a long-stop for the 1.2m employers still to auto-enrol. But – and you’ll excuse a cricket analogy in the circumstances, NEST seems to want to be captain and opener as well as sweeping up.

Isn’t a Strategy restatement necessary?

This is the thorny problem facing the new CEO, replacing Tim Jones. I hear rumours of who this may be but no announcement has been made. Like the 2013 accounts, such an announcement is overdue.

If NEST is trying to get the rest of the industry to raise its game then it is doing so the wrong way. By working apart from other providers and eschewing PAPDIS, NEST is showing the kind of  megalomania that characterised Nationalised industries in the second half of the last century.

NEST may well know best, but its solutions are paid for by the taxes of its members and- ironically- the taxes of its competitors.

Should NEST be the default option..

The British Government could- at the start of auto-enrolment – hae deemed NEST “the only fruit” and required companies to use it. It did not do this, for good reason.

Instead it agreed to deliberately position NEST as an option with limited facilities (what are now known as the NEST restrictions) and a charging structure that nodded to the fact that at some point the £400m + owed by NEST would have to be paid back to the Government.

As I wrote yesterday, anyone choosing NEST must be aware of this debt and that it needs to be repaid from member’s funds. Member’s funds are not £400m in total (yet) and even when they become  100 times that number, it is hard to see the debt being repaid in a hurry. It is likely that the costs incurred since the inception of PADA (NEST’s earlier incarnation) will be a lifetime mortgage against its current member’s pension funds.

Isn’t NEST mortgaging its member’s pensions?

Which is why every penny that NEST spends today, must be repaid by members tomorrow. NEST must be accountable to its members (it would help if we could see the 2013 accounts), NEST must also be clear about what its strategy is.

Whoever succeeds Tim Jones must refresh our memories as to why NEST is operating in the way it is, why it is not sharing its development work with the rest of the workplace pension providers and why it is not adopting the common data standard PAPDIS.

Most of all, it has to be clear about how it fits into the firmament of workplace pensions. Does it consider itself long-stop or opener? Does NEST consider it the default pension or one of a number of options open to SMEs and micros?

I am clear in my mind what the word “choice” means and it doesn’t mean “default to NEST”. NEST should and is setting standards in design, governance and operation. It would be better if it used it’s massive resource to ensure that others reach these standards.

Thankfully NEST is not a Lamborghini, nor is it a Trabant.

But there is a real danger otherwise that NEST could do to workplace pensions what Trabant did to Eastern European car manufacturing,

trabant 2

and what Lamborghinis did to Pension Freedoms….

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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