In 2021, Nest and Atos announced a shared commitment to help millions enjoy a better retirement (I and my staff among them). We were told at the time

The new service, which will begin in 2023, will focus on making the most of advances in technology and data analytics to deliver personalized and tailored services to each of its members.

Atos’s state-of-the-art technology and cloud hosting platform will provide a scalable, agile and low-carbon solution for all processing and administrative IT, which can adapt to future requirements.

Awarded following a competitive tender run in line with Public Contracts Regulations 2015; the new contract will last for a minimum of ten years with an optional extension period of up to five years and the option of an additional period of up to three years for exit.

Nest’s Corporate Accounts for 2022/3 show the true cost of the failed venture with Atos, the French software giant – which has since been scrapped

2022/23 saw £74 million in one-off expenditure
relating to the service transformation programme
over the 2-year period with Atos BPS as our partner.
During our programme of work, we jointly developed
assets related to the transformation of our scheme
administration and the planned migration and
transition of data and services.

Assets totalling  £59.4 million previously held on our statement of financial position (SoFP) have subsequently been
impaired, with a further £14.6 million expensed
directly to our statement of comprehensive net
income (SoCNI). We have taken the decision to impair
the assets developed with Atos BPS in full on the basis
that we cannot provide certainty on the future
economic benefits of these assets. However, as part
of the transformation programme with TCS, which
commenced following contract award in June 2023,
we intend to review each impaired asset and re-utilise
where it is beneficial to do so.

The one-off expenditure of £74 million is inclusive of
a £28 million final payment to Atos BPS. The payment
includes £18 million to satisfy an outstanding payable
for assets already developed and therefore included
within the £59.4 million impairment loss, and
£10 million in relation to partially developed assets
yet to be capitalised and therefore expensed directly
to the SoCN

The impairment and other payments saw Nest’s investment and administrative costs almost double on 2022

2022 right column

As a result , Nest had to drawdown £158m of its preferential loan facility from the DWP

Meaning that Nest is now in hock to the DWP for £1.13 bn, Nudging its £1.2bn credit limit. The Public Service Obligation Asset is a grant made by the DWP to Nest each year for Nest having to offer services to employers other workplace pensions wouldn’t touch. It has been paid since Nest’s commencement and forms a substantial further subsidy.

Clearly, if 2022/3 was to be repeated next year , Nest would be in financial trouble.

Fortunately, Nest is within a year of breaking even , though it expects to be within a hair’s breadth of the maximum drawdown by the end of next year

Nest is currently supported with a government loan. Nest estimates that it will no longer require funding from the Govt from 2024 onwards, at which point the estimated borrowings will be £1,195 million.

Nest forecasts the loan to be repaid to the UK government by 2038.

— Josephine Cumbo (@JosephineCumbo) October 24, 2023

The original loan document to NEST is available under FOI via this link  

Back with Tata till 2041

Nest expects to have paid off its DWP loan by 2041. Coincidentally it has also resigned with Tata (whose UK operations are headed by former Nest CEO – Tim Jones) till 2041.

Since the end of the reporting period, the Corporation has entered into two significant commitments in respect to the provision of scheme administration services.

During June 2023, the Corporation extended the current contract for the provision of scheme administration services with the incumbent provider. The 2-year extension term aligns to management expectations and no amounts presented within the financial statements have been adjusted as a result.

In addition, in June 2023, the Corporation awarded a long-term contract in relation to the provision of future scheme administration services. The commitment totals a maximum value of £1.5 billion over the total 18-year term from end of 2023 to end of 2041. An implementation programme will be conducted ahead of an expected operational commencement in July 2025.

So what does the disastrous episode with Atos mean?

It means less money available to the investment team to boost the value of our money

It means a delay in the promised improvement of the member experience

It means £74m wiped off tax-payer equity in Nest.

Mistakes are made , but too often lessons aren’t learned. My conversation with Tim Jones on this matter suggests that something went very wrong in the procurement and management of the Atos contract.

Nest continues to pay well and apparently above the going rate of salary increases in 2023

Nest reported that it chose to pay an increase of 5.5 per cent to staff, with the fund providing the Department for Work and Pensions with “clear business rationale” to support the increase.

— Josephine Cumbo (@JosephineCumbo) October 24, 2023

The Remco’s report suggests that while top staff got decent pay increases, performance related pay fell.

Whether the fall in performance related pay is attributable to Atos, we do not know, but we do know that the Nest senior management team remained intact which suggests that they have been given a clean bill of health – to continue.

Nest is pretty open with us about its successes, perhaps it could tell the tax-payer  what lessons it has learned from the Atos misadventure.