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Why PensionBee wants to bring employee pensions into the 21st century

The UK pensions industry is ripe for digital disruption.

Allie Nawrat

Credit: Chibelyaeva Katya via Twenty20.

PensionBee aims to make pensions work better for the end customer: individuals. Unleash Your Pensions

  • PensionBee has floated on the London Stock Exchange.
  • Founded in 2014, PensionBee helps individuals consolidate all their pensions into one place without dealing with mountains of paper.
  • What does the future hold for PensionBee and the broader UK pensions industry?

On 26 April, UK pension consolidation fintech company PensionBee listed on the high growth segment of the London Stock Exchange.

PensionBee priced its initial public offering (IPO) at 165p per share. The offer includes the sale of more than 33 million new shares, as well as two million existing shares — this brings the total offer size to £59.6m and values the company at £365m.

PensionBee was created in 2014 “as the result of a pension transfer gone wrong,” explains chief engagement officer Clare Reilly.

CEO Romi Savova founded the company after the nightmare she faced when trying to consolidate her workplace pensions; “the whole process was so frustrating, time-consuming, and ultimately negative that it gave birth to PensionBee,” adds Reilly.

Instead, PensionBee aims to cut through the complexity – and mountains of paper — that exist in the UK pensions space by helping consumers consolidate all their pensions seamlessly into one, easy to access, location.

“The mission is to make pensions simple and the vision is [ensuring] that everyone can look forward to a happy retirement,” notes Reilly.

By growing the company and its consumer base, PensionBee is able to focus on listening to what consumers want from their pensions, which is more sustainable and ethical investment options.

The company wants to “effect positive social change in society and […] make the world a better place for people to retire into,” states Reilly.

pensionS: ripe for digital disruption

The UK pension market is the third-largest in the world, and is worth $3.6trn (£2.5trn) in 2021, according to Willis Towers Watson.

Despite being vast in size and scale, the industry isn’t digitized and has no standardized data. Also, providers primarily communicate with savers through the post, rather than through email – and in doing so, just communicate a static pension pot balance.

Reilly explains that the low levels of digitization in the industry are due to the lack of competitive pressure. But this creates a business landscape that is really difficult for consumers to navigate, which ultimately leads to both consumer and societal harm.

“You’ve got chronic under-saving because people don’t have the data or tools to know they need to be saving more, because they’re not getting the data they need to do that,” states Reilly.

going paperless

In contrast, PensionBee aims to “remove all the friction from the process”, according to Reilly. Consumers go to the website and input basic information, including national insurance number, name, address, date of birth, and then give basic details about their pensions.

Then PensionBee goes and pulls all those pension pots into one place. Importantly, “for consumers, it is a completely paperless process”, as PensionBee automates the whole process with the help of machine reading robots.

The PensionBee team deals with all the paper; “we don’t let that paper get beyond the post-room”. The fintech takes this approach because they know large paper packs put consumers off.

Consumers can then log onto their PensionBee account to look at their balance and manage their balance whenever it suits them, rather than waiting for a static balance on a paper statement to come through the post.

When individuals first sign up to PensionBee, they are placed in a target date fund – which is the same as products used for workplace pensions.

However, PensionBee has eight other pension plans. There are three responsible plans that are part of its offering – including a Shariah one that allows people to invest in accordance with their religious belief and a fossil fuel-free plan. The latter came about in response to consumer feedback.

“Something that really struck me about the pensions industry was there was no consumer voice. Customers have been historically sidelined because the focus has been on employers or advisors,” states Reilly.

This means that the investment defaults offered in the workplace simply follow the biggest companies in the world – even if they are unethical companies working in the oil and tobacco industries.

Gowling WLG notes that now is the time for all pension providers to start focusing on environmental and social issues — a shift is already starting to happen with major funds pledging to align their funds to the Paris climate goals just a month ago.

Alongside offering ethical plans, PensionBee is committed to offering the same standard of protection found in a workplace scheme, but they do not offer a workplace pension themselves as they want to focus on the consumer’s needs alone.

The final core part of PensionBee’s differentiated approach is that they want to cater for everyone aged 18 to 80 “whether they have £10 or £1 million” – including the self-employed. Unlike most competitors, they require no minimum pension pot or contribution; they are not just focused on the top end of the market.

The future of pensions

PensionBee’s dream for the future of UK pensions is a lifetime provider model.

This means that the consumer chooses their pension provider – rather than having their employer’s preference thrust upon them – and you take that one pot with you through your working life.

Of course, Reilly notes, consumers would be able to change their provider, in a similar way to how you change your bank account. But this would help create competitive pressure for innovative and improvement in the market.

She explains that Australia has this model, but it would be tricky to implement in the UK because it would require a central clearing house. Currently, employers only want to work with one provider because it is easier for their payroll system.

Currently, there is limited appetite to pay for this clearing house to distribute the money between the many different providers.

However, Reilly is optimistic that, following the success of open banking, the pension industry is now next in line in the open data revolution. If so, a lifetime pension provider model could well become the reality in the UK.

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