It’s hard to ignore the current zeitgeist for app-based money management and digital investing. But when it comes to saving for retirement, the greatest challenge for fintechs is still educating and engaging young adults facing an uncertain future. The wave of digitalisation that has swept the financial market over the past 10 years has led people of all ages to get more actively involved in their personal finances. But there persists a well-established impression that pensions are by comparison stuffy, boring, complicated, and not relevant for younger people. Romi Savova founded PensionBee in 2014 with a desire to make pensions simple and help customers to locate, consolidate, and manage their investments. PensionBee has certainly tapped into the current trend for managing money and investments digitally and via apps, and the company is passionate about engaging with and educating their customers. Having set out to solve a problem, Savova herself remains actively involved in responding to users’ needs, and with a potential savings crisis on the horizon when today’s young adults retire, a savvy young business owner on the side of millennials will surely help to bring attention to the issue.

There’s something very motivating about having a holistic view of your finances and seeing your savings grow over time

Primarily, that issue seems to be that pensions still scare people off with an intimidatingly complex reputation, and Savova agrees. “Pensions are often thought of as complicated and difficult to manage, and many people associate their pensions with filling out paperwork piled in a scary drawer. PensionBee’s mission is to make pensions simple. We do that by enabling consumers to interact with their savings through a unique combination of smart technology and dedicated customer service.”

So far, so user-friendly. But rather than training and working in one specialism for one’s entire working life, it is the norm these days to have a portfolio career, moving to new jobs and even completely different industries several times over. It is rare for people to retire at 60 when they may live beyond 85 (see Fig 1). The department for work and pensions predicts that the average worker will have 11 different jobs during their career, with each workplace – since 2012 – now automatically enrolling eligible staff into a pension scheme (see Fig 2). “Pension consolidation is one of the most popular reasons savers choose PensionBee,” Savova tells World Finance. “People are busy, and their time is valuable so they want to sort out their finances quickly and simply so they can confidently get on with their lives. The days of taking time off work to fill out lengthy paper forms and spending hours on the phone to legacy providers are long gone. Now these tasks can be done in a few clicks from an app on your mobile while you’re travelling to work or sitting on the sofa.

“For younger savers in particular, there’s something very motivating about having a holistic view of your finances and seeing your savings grow over time – thanks to a combination of compound interest, personal and employer contributions and perhaps even investment growth. Having full visibility from an early age can help savers achieve their goals faster and ultimately get the retirement they want.”

Embracing the hive mind early
Here, Savova touches on a vital point. It is only in the past few years that financial education around savings, loans, pensions, and mortgages has made it onto the UK school curriculum. That means that, unless it was specifically chosen by or for them, young adults in their 20s and 30s today had no guaranteed financial education. The impact of a financial education cannot be overestimated, and a quick look at some statistics about the amount of money sitting in ‘lost’ pensions in the UK alone is jaw-dropping. Thinking about its customers and the pension market at large, we ask Savova if our collective ignorance is obvious to her expert eye, and can anything more be done?

She explains that her company exists to solve a real problem facing millions of people in the UK. “The pensions landscape is too complex, it’s still too difficult to get basic information on how much you’re paying in fees, where your money is invested or even what your current balance is. Despite this poor experience, consumers are often reluctant to make changes for fear of doing the wrong thing. As a result, many savers risk missing out on better pension plans that could help them look forward to a happy retirement.

Many savers risk missing out on better pension plans that could help them look forward to a happy retirement

“We’ve created a product that seeks to give people pension confidence and a sense of optimism about their future, as they know they are saving regularly for the retirement they expect and deserve. Confidence and optimism aren’t emotions that most people feel about their pensions right now, and that’s because the market is not currently set up to serve savers in the ways that they need and expect. We see evidence of that across the UK in the lack of engagement, low contribution rates and the estimated 20 million pension pots left behind when people have changed jobs.
“One of the most common questions we’re asked is how much to save for retirement. And of course, the answer is the earlier you start the better.” The global average is estimated at 78 percent of current income for a comfortable lifestyle (see Fig 3).

Savova continues; “Over time, the compound interest savers can earn on their savings could have a significant impact on their pension pot by the time they decide to retire. If only those working today had been taught this when they were at school, we might not be in the midst of a savings crisis where many retirees face the very real risk of a shortfall in later life.”

Environmental concerns
Another common worry, particularly among those new to investing, is around having their money fund industries they may not agree with, such as fossil fuels. Even if pension issues are considered to affect the older population disproportionately, environmental issues face the younger among us far more. While it could be argued that younger generations have more pressing financial problems than their parents or grandparents before them (it is widely believed that millennials are the first generation ever to be materially worse off than their parents), it is also the case that theirs is an active and engaged generation who have no problem challenging authority and have multiple ways to do that from their smartphones. Just as young activists can tweet directly to world leaders, could there be untold collective power in our pockets in the literally trillions of pounds in our pension pots?

Campaigns like Pension Awareness Week encourage us to take a moment to educate ourselves about what pensions are, what they can do, and why it’s important to invest as much as you can as early as you can. Even a one percent increase in contributions can, with the power of compounding, add up to significantly more in a final pension pot at the end of one’s career. According to the Make My Money Matter campaign, spearheaded by film maker and co-founder of Comic Relief, Richard Curtis, “greening your pension is 21 times more powerful at cutting your carbon than giving up flying, going veggie and switching energy provider, combined!”

Being a millennial herself, Savova is no stranger to environmental and social crises, and this also taps into the drive she feels to educate and engage her customers. We talk a little about the gathering momentum for using investments for good, and ESG as an indicator of IPO success. Could it be that having a choice about where our money goes is the hook for young people to engage more with their pensions? She thinks so.

“We’ve seen from our own customer base that younger savers are more likely to be invested in one of our responsible plans. Increasingly the younger generations are voting with their feet and choosing the companies and products that align with their values.

“Our fossil fuel free plan was created in 2020 in direct response to customer feedback, which highlighted a growing divide, with some customers wanting to engage with oil companies and others no longer believing in the effectiveness of engagement, instead desiring a product that excluded oil from the outset. The plan excludes firms with proven or probable reserves of oil, gas or coal; tobacco companies; manufacturers of controversial weapons and persistent violators of the UN Global Compact.

We’ve found a way to connect with a generation that has long been forgotten by the legacy providers

“At PensionBee, we believe that sustainable business practices have a positive impact on long-term pension returns. Therefore we consider it important to regularly seek our customers’ views on how their pension, and the companies it invests in, should evolve in a changing world. In our most recent survey, the majority of savers invested in the fossil fuel free plan told us that they are happy with the current exclusion policy, but a significant proportion told us they wanted to also exclude companies that provide associated services to the major oil producers and also banks who finance fossil fuel exploration. As a direct result the plan has now broadened its exclusion criteria to remove companies that provide associated services to the fossil fuel industry.”

It is refreshing to find that the firm’s customer response policy is more meaningful than a token fund, and PensionBee is also listening to a minority within this customer group that want to move more quickly still: “We’re committed to finding a new plan that goes even further in its exclusionary policy, with a focus on positive impact. Even though this new plan is likely to come at a higher cost and reduced diversification, given the emerging nature of this segment in the economy, there’s a growing appetite for a plan of this type. A change is definitely underway and it’s young people who appear to be leading the charge!”

Pension activism
Here, we seem to find the paradox. Young people care about everything. There has never been such passion and drive around veganism, social issues such as Black Lives Matter, averting the climate emergency and corporate social responsibility. With an increased awareness of where our money goes and putting investment back into local economies and towards good causes, comes a surge in the proliferation of ethical funds and pension investments. Combine tech-savviness with the moral imperative for this generation to do better, and rather than a bleak situation, we could be at a perfect tipping point, a new age of pension investing that not only benefits the individuals who are taking control of their own futures, but that also contributes to a less gloomy future for the planet as people quite literally take matters into their own hands.

Any shrewd entrepreneur knows that there is opportunity in solving problems of inconvenience or effort, and PensionBee takes this premise and creates an easy to use and understand platform that could end up changing customers’ behaviour, such that they end up with a pension that is much more fruitful than it would have been otherwise. In terms of strategy, I wonder whether PensionBee consciously positions itself as a ‘challenger’ in the world of pensions as Starling, Monzo et al have with retail banking. Savova is direct in acknowledging that since it was founded in 2014, PensionBee has been a challenger in an industry ripe for disruption.

“We’re constantly innovating and setting new standards of transparency in a sector that hasn’t changed or adapted with advances in technology and consumer behaviour in decades. We’ve found a way to connect with a generation that has long been forgotten by the legacy providers, and are passionate about campaigning on behalf of savers to improve standards across the industry, whether that be around exit fees or consumer switch guarantees.

“Being on the right side of change, particularly in financial services, is very motivating. Over the years we’ve learned that as long as you have the consumer on your side and are doing the right thing, you can take on huge battles and win. “We aim to be the best universal online pension provider, and in the past 12 months have released several innovative new product features that set us apart, including deeper open banking integrations, so our customers can manage their pension in some of the UK’s most popular money management apps, and creating a pension product for the self-employed, a group who have historically been underserved by the pensions industry.”

I wonder if there is a typical PensionBee customer, and if the company’s metrics show any gender or generational bias. I assume young adults make up the majority of the customer base and I am right, with those in their 30s and 40s making up the majority. Interestingly, around 20 percent of its customer base is self-employed; a significant proportion of whom will be classic portfolio careerists. The gender split is around 3:1 in favour of men, but Savova assures me they are putting plans in place to significantly increase the number of women signing up to PensionBee next year.

“The needs of our customers vary and we’re here to help them look after their pensions throughout their savings journey, from sign up to drawdown. PensionBee’s vision is to live in a world where everyone can look forward to a happy retirement in the form of financial freedom, good health and social inclusion. Educating people about the benefits of saving for later life is vital to achieving this.

“Saving for retirement is a marathon, not a sprint. It can be overwhelming to think about how much a saver will need to put aside to be able to afford the lifestyle they’d like in retirement; however, it’s important to set realistic goals, whatever their age, and use a pension calculator to ensure they stay on track. Apps like PensionBee’s increase consumer engagement with pensions and help savers feel a sense of control and ownership over what’s happening to their money. By feeling in control, we hope that savers will consider what retirement could look like for them so that they make appropriate contributions and better plan for later life.”

Gathering the nectar
I attempt to follow the process and try it for myself. PensionBee shouts loudly about helping you trace your old pensions, but in the early stages of signing up with them it becomes apparent that they can only trace what you can provide. This is reasonable, but unless you have a list of previous employers and their associated pension providers next to you when opening your PensionBee account, you will still likely find yourself trawling through emails and paperwork attempting to dig out the name of your previous providers. The UK government has a pension tracing website that may be able to assist with this.

It is also worth bearing in mind that pensions held from civil service, the NHS, teaching positions or other public sector jobs like local government are not possible to transfer into a PensionBee scheme, or any other for that matter. The reason for this is twofold. The first is simply that the government does not allow such pensions to be moved anywhere other than its own scheme, probably because it is in everyone’s interest to not risk billions of pounds being moved out of government control and potentially into high-risk portfolios or poorly managed funds, or simply being forgotten about. The government invests and manages these pension funds itself, and returns are then used to raise capital for government aims.

The second reason (and perhaps a tonic to the above) is that civil service pensions are roundly considered to have excellent terms and no adviser would suggest you’d get a better deal elsewhere anyway. The upside to that is that people with such pensions can continue to benefit from them; the downside is that it means that no app or pension system will be a ‘one stop shop’ for you. PensionBee and its ilk plainly offer the most benefit and convenience to those who have had several previous jobs in the commercial sector. It will appeal most strongly to those who have a standard portfolio career rather than those in state positions.

Empowerment through taking control
Apps like PensionBee take the hard work out of tracing your own pensions from days gone by and enable you to start saving easily if you haven’t already, split into one of eight funds. No endless options to scroll through, no paperwork. Yes, for the more experienced investor there isn’t much to challenge you or lots to compare and contrast, but the financial imperative is for people today to take care of themselves (and the planet) in a way that has not taken this shape before. Gone are the days of a once-a-year letter from a pension provider you didn’t know you had, telling you how a set of investments you don’t understand have performed. Gone are the days of working for the same employer for 50 years in the hope of having a vaguely comfortable retirement.

Gone are the days of working for the same employer for 50 years in the hope of having a vaguely comfortable retirement

So many elements are at play here: portfolio careers where people switch jobs every five years or so. The willingness of young adults to look corporations in the eye and ask where their money is going. The proliferation of fintech startups that bring ease, speed, and dare I say it, fun, into making investments and watching your savings grow. The fact is that more and more people are aware that the future does not look good, either in terms of relying on the state pension alone or when considering the direction the world is headed.

Savova certainly seems to understand this duality. On the one hand is the need for digital money management and making finances easy and relevant to everyone, but especially younger adults. On the other is a global imperative to put a stop to climate change and impending doom. The paradox is that something historically thought of as boring, irrelevant, and moreover a long way off, could be crucial in tackling the ecological disaster that may once have been far away, but has now very much come knocking. We may not be especially motivated to riffle through financial paperwork for a retirement that is decades away, but Romi Savova says it doesn’t have to be that way, and for a small amount of effort, we could all take practical steps towards a significantly improved retirement pot and, with a bit of luck, a sustainable world in which to enjoy it.