RUTH SUNDERLAND: Is PensionBee a honeypot? The float hammers home that pensions are far too complicated
- Many people take an ostrich-view of their pension and adopt a position of inertia
- Romi Savova had the idea to set up PensionBee in 2014 because of her frustration at trying to transfer an old company pension when she changed job
- PensionBee is floating on the stock market, with a value of between £346m and £384m, making Savova’s stake worth around £140m on paper
Buzzing: Romi Savova had the idea to set up PensionBee in 2014
Romi Savova is fond of telling a story of how she had the idea to set up PensionBee in 2014 because of her frustration at trying to transfer an old company pension when she changed job.
Her pot of savings was small, so no-one was terribly interested. This is not a problem the 35-year-old is likely to have in future, given that PensionBee is floating on the stock market later this month, with a value of between £346m and £384m, making her stake worth around £140m on paper.
PensionBee is making its stock market debut as part of a wave of tech floats. London is keen to secure its status as a financial centre post-Brexit and a review by Lord Hill aims to increase the City’s attractions to tech companies. Savova has ticked some of the right boxes. Unlike Deliveroo’s founder Will Shu, whose beefed up voting rights upset some investors, she is a believer in one share, one vote, though with a 36pc stake she will still have plenty of clout. In common with Deliveroo, the company is offering customers the chance to sign up for shares. But will PensionBee prove to be a honeypot?
As of January the company, which styles itself as a leading online pensions provider, had nearly 120,000 active customers and £1.4billion of assets under management.
Its core service is as a ‘consolidator’, allowing customers with a number of small pension pots from different employers to bring them together in one place, potentially saving on fees and charges and improving investment performance. Money is managed by US giants BlackRock and State Street, in passive funds, so the fees are reasonable and there are no Neil Woodford-style worries about a fund manager losing his or her Midas touch.
PensionBee doesn’t plan to pay dividends, and is making a loss, though neither of these are necessarily deterrents in a tech stock. Savova has attracted heavyweights to her board, including Mary Francis, a former director of the Association of British Insurers and a non-executive at the Bank of England, Aviva and Swiss Re. The chairman is Mark Wood, a pensions industry veteran who ran the Prudential’s UK business.
Although consolidating can be a sensible move, it is not a universal panacea. PensionBee does not offer advice and whilst it tries to ensure customers don’t give up valuable benefits when they move, it is essentially caveat emptor.
I have a waft of deja vu. The pensions market has, since the liberalisation of the 1980s, been a happy hunting ground for entrepreneurial souls who think they have found a solution for savers’ problems that co-incidentally will be a money maker for them.
Indeed, Wood was a big player in the last wave of activity through his former firm, Paternoster, which was set up in 2005 to buy up the risks on final salary pensions, and was sold off to Goldman Sachs.
At the time, this business created excitement but deals proved hard to do. There is certainly a potential market for PensionBee’s kind of service as the average person is expected to change jobs 11 times over a career. Auto-enrolment also means many more people are acquiring small pots.
Whether consolidation activity will take off at the scale required to send the shares shooting upwards is a different question.
Many people take an ostrich-view of their pension and adopt a position of inertia.
If nothing else, this float hammers home that pensions are far too complicated. For most people, the issue is not whether or not to save with or invest in PensionBee, it is that they are simply saving too little.