System update on restart takes to TWRP
You need to flash stock recovery to install stock OTAs without computer-based intervention. 

Alternatively, you can download the relevant OTA for your version of KitKat, put it somewhere on your Nexus's internal storage and flash it in TWRP  like you would any other flashable zip. Although you may want to note that xposed doesn't work with Lollipop yet, and rooting is a little bit more involved than it was on kitkat.