back to article Nest tosses £1.5bn pension admin service agreement out there for outsourcers to fight over

Outsourcing giants must be rubbing their hands with glee after the National Employment Savings Trust (Nest) Corporation issued a tender for a £1.5bn contract to build the tech to run pension admin services. Nest is a UK government-backed workplace pension scheme launched in 2011 that has signed up more than 730,000 local …

  1. Red Ted
    FAIL

    Another government IT outsourcing project?

    I can see where this is heading already....

    1. ecofeco Silver badge

      Re: Another government IT outsourcing project?

      Beat me to it.

      You can bank on it.

      Say, this be "shorted" somehow?

  2. Bottle_Cap

    Start hoarding animal pelts folks....

  3. Andy The Hat Silver badge

    "the most economically advantageous final tender"

    Using the most economically advantageous distribution of ink based resources I would have written "cheapest". It doesn't even disguise it by saying 'value for money'!

  4. adam payne Silver badge

    The winner will get to work on the new platform three years before it goes live to ensure a "safe migration".

    It will almost certainly cost double and be years late. The government will more than likely spin it as a success regardless of the outcome.

  5. tip pc Bronze badge

    What’s wrong with the current implementation, can’t they just insource that at a fraction of the cost returning many hundreds of millions as pensions assets?

    Just a thought

  6. bigbob

    Analysis

    18 year contract:

    A contract signed 18 years ago would proudly have included compatibility with the then brand-new Windows XP. That's probably aged better than most other software from 18 years ago, and yet it is practically radio-active these days - people are throwing away multi-million pound CAT scanners because they can't take the security risk of it running Windows XP.

    18 years ago we interacted with customers via phone. Email support would be modern. Twitter, slack etc were at least a decade from being invented.

    18 years ago software releases were annual events, involving coordination of multiple teams, locked-down months in advance to order the hardware, frequently went wrong, were hugely expensive, had no production-type testing and delivered a fraction of the value we expect today. Modern cloud and devops is not perfect, but is light-years ahead in every dimension.

    Money:

    £1.5bn is three-times what it costed to create the IT system to run the UK's whole prison system: https://www.theregister.co.uk/2009/03/12/nao_probation_report/ - a massive overspend in itself. All this money to administer a pension scheme?

    AWS halved its (Lambda) compute price last year, and how much of this was passed on to customers by the outsourcing companies? None.

    Strategy:

    Anyone will tell you: Outsource stuff that is undifferentiated heavy lifting. In-source what is risky, or is your key differentiator.

    Maybe NEST has unique needs for administering pensions, compared to the dozens of other UK pension providers - I'm no expert. BUT you'd think everyone had realized by now that IT is risky and executing it well is key to nearly every organization's success. It makes no sense to outsource.

    1. Anonymous Coward
      Anonymous Coward

      Re: Analysis

      I worked on a large project for a government department in New Zealand about ten years ago (hence anonymous). They were (and still are) big proponents of outsourcing everything to do with IT and other services.

      Now there are zero people employed by the agency who understand the system or even where to find the documentation that was provided. They reached out to me and I provided them the documentation as a favour and with the hope of getting some more work from them in the future. But when that time comes, if I were an unscrupulous sort, I could charge whatever I wanted became they have no ability to support the application or upgrade or migrate off it in-house.

      This is the long-term legacy of all this outsourcing - the continued reliance on service providers for ever. Until and unless the organizations begin to bring the work back in house

    2. Anonymous Coward
      Anonymous Coward

      Re: Analysis

      > It makes no sense to outsource.

      Best practice and cost-saving are not the issue, it's political philosophy - reduce the size of the public sector and worry about the cost later.

  7. Buzzword

    £6bn of assets, £1.5bn of overheads

    £1.5bn over 18 years is £83m/year. That means the annual outsourced IT cost alone is 1.3% of assets. NEST currently levy an Annual Management Charge of just 0.3%, so it's not clear where the rest of the money is coming from. Personally I'd steer clear of a financial services provider whose numbers don't add up.

    1. Bearded

      Re: £6bn of assets, £1.5bn of overheads

      They charge another 1.8% on every contribution to your retirement fund. This was meant to be temporary to cover the cost of setting up the scheme, it doesn't look very temporary now. This tender seems like an outrageous ripoff of retirement savers to benefit big business.

      1. yoganmahew

        Re: £6bn of assets, £1.5bn of overheads

        And these are savers with very small pots, precisely those who can't afford it - 6 billion / 730,000 = 8219.17808

        It's not so much a retirement fund as the price of a trip to Switzerland...

  8. Blockchain commentard Silver badge

    So, it's not the fancy doorbell & thermostat company called 'Nest' then? Thought that was a fancy budget for them.

    1. paulf Silver badge
      Thumb Up

      Nice to know I wasn't the only one who came to this story thinking it was about Google's Spying-Thermostat-As-A-Service operation.

  9. M7S

    So, someone like Capita* will end up managing our pension funds

    Oh well, better retrain for something I can do until I'm 97 then...

    *Other "usual suspects" are no doubt also in the running

    1. keithpeter
      Facepalm

      Re: So, someone like Capita* will end up managing our pension funds

      Teachers' Pension Agency beneficiary here.

      See icon.

      (Actually the system is functional but has 'issues' if you have more than one employer within the sector)

  10. happy but not clappy

    I can do it for half that sum.

    Just saying.

    1. Andrew 6
      Trollface

      Re: I can do it for half that sum.

      Shove it on rent-a-coder or similar and I bet I can find someone who say they can do it for under £1000 :-D

  11. Anonymous Coward
    Anonymous Coward

    Got a NEST pension?

    Make sure you keep your own copies of all correspondence.

  12. NeilPost

    Why??

    If they must outsource it, why not turf it out to a reputable existing company that already has the systems setup

    Like say Standard Life???

    You can just see the on-coming IT train-wreck in 5 years already....

  13. cantankerous swineherd

    got auto enrolled with rhese shysters. iirc they reckon they can get a real rate of return of 5% or so, definitely not widows and orphans territory these days. got out pronto.

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