Fintech Pensions Start-Up Pensionbee Triples Client Assets To £1 Billion

Pensionbee, one of the UK’s most promising fintech start-ups which has been described as the “Monzo of pensions”, has reported 300% growth in customer numbers over just 20 months. The company, founded in 2014 to help users transfer and consolidate legacy pension pots on one low-cost digital platform complete with app, has also seen assets under administration hit $1 billion.

Despite its successes, like many scaling fintechs, Pensionbee is also racking up losses, which have doubled over the start-up’s most recent accounting year. But it should be noted that would be expected at the relatively early point of scaling the company is at. Pensionbee itself has declared it is “delighted” with progress.

Pensionbee’s growth success also means the start-up is now considering either a flotation or partial sale to raise the capital now required to improve liquidity and fund further growth.

Pensionbee’s net operating losses before exceptional items rose to £6.86 million over the year to the end of 2019, from £3.41 million over the previous calendar and fiscal year. Growing losses were budgeted for and the result of strategic spending on marketing. Marketing channels most used were television and social media.

The net result of that marketing blitz was growth in active customer numbers, defined as those that have either transferred pensions to Pensionbee, or issued instructions to legacy pots to do so, to 64,200 from 28,900 a year earlier. Over the first 8 months of 2020, active client numbers have swelled further to around 100,000, the company reports.

Pensionbee’s founder and chief executive is ex-Goldman Sachs and Morgan Stanley banker Romi Savova, who set up the start-up having encountered difficulties herself when trying to consolidate legacy pension pots. The 35-year-old, along with key colleagues, still holds around 60% of Pensionbee, with the remaining 40% split between investors that include U.S. financial services group State Street. Former Prudential chief executive Mark Wood is also an investor in addition to chairing the pensions start-up’s board.

The start-up states its addressable market is worth £500 billion. That is the value of defined-contribution pension pots UK residents hold from past jobs and say they would like to transfer but are either worried it will be difficult or damaging or have been too busy to act on.

Pensionbee’s branding and fintech approach may look like it is targeting a younger audience but the average user’s age is 40 and its faster growing customer segment the over-50s. That makes sense as slightly older workers are more likely to have legacy pension pots from previous employers.

Despite recent losses, Ms Savova is also optimistic Pensionbee can reach break-even in the “near to medium term”. She is reluctant to be drawn on a valuation of the company, stating:

“We don’t focus on our valuation at all. It leads people down the wrong path. We’re focused on growing the customer base.”

Pensionbee has also now said a “liquidity event”, the opportunity for existing investors to cash out some of their ownership stake, has now become probably, even if not expected imminently. That would be through either an IPO or partial sale of the company, possibly to a large, established financial services company or private equity.

Assets under administration will see a jump in coming months with around 40,000 Pensionbee customers currently in their ‘limbo period’, between having requested legacy pension pots to be transferred to the fintech and those requests being executed. Pension companies have six months in which to finalise transfers. Many stretch out doing so to towards the end of the period within which they are legally obliged to do so.

Pensionbee’s employees, customer-facing staff are referred to as ‘beekeepers’ and back office staff ‘nectar collectors’, have seen their ranks grow to 102 today from 34 at the end of 2018.