A recurring theme when I talk to CEOs and Fund Managers about long-term investing is that to make money most of the time you should do absolutely nothing. That, however, is in stark contrast to the fact that you must do something absolutely immediately, as soon as possible, this instant.
Both are true, you should start investing and saving for your future immediately, and then you should probably do absolutely nothing.
This is one of the frustrations that Romi Savova is trying to solve with PensionBee. She points out, “lethargy will cost you money”. The aim of PensionBee is to make taking the first step and getting that first contribution into your pension as quick and simple as possible.
In our interview, we discussed why she set up PensionBee and what we can all do to make more from our pensions.
Why did you set up PensionBee? Was it because of a personal frustration you had with your own pension or did you spot a gap in the market?
I think it’s a bit of a combination of both I would say. The immediate trigger for thinking about pensions was having to move my own pension out of a corporate pension plan, and finding the process incredibly difficult and daunting.
I left my name on several advisor websites and no one called me back for about three years because my pension simply wasn’t big enough. I tried calling pension providers but none of them wanted to talk to me unless I’d had the input of a financial advisor, which I didn’t actually need.
So this chicken and egg problem presented itself and widely within the UK, it’s broadly referred to as the advice gap. The advice gap effectively prevents consumers from doing very simple things with their finances, which in my case was moving my pension from my company plan into a new plan.
Having searched around and having worked in financial services, I came across one of the major platforms, and after filling in many forms and going to the post office several times – something I would definitely not do in the age of the coronavirus – my money made it over and I was presented with a menu of several thousand different investment options. Like most people, I picked a fund that I had heard of and put the money in and promptly, the fund went down and I realised I’d been overcharged.
Separately to that, I had worked in financial services, so I did actually know quite a bit about the market, and the looming problem of automatic enrolment when it comes to pensions, and the frequency of job switching, which means that almost every person will have one or more pensions that they’ve left behind.
So the market opportunity, together with the personal experience, encouraged me to talk to everyone I knew about pensions. I quickly discovered that almost everyone is in exactly the same situation, whereby they have one or more pensions, usually the paperwork is in a drawer, what they are looking for is a simple and easy way to sort it out.
That was really the genesis of PensionBee – an easy way to sort out combining your pensions into one new online plan.
But we’ve expanded beyond that. We’ve grown into a full-fledged online pension provider, meaning you can combine with us, you can add new contributions, you can forecast your retirement outcomes, you can invest responsibly, and then eventually, from the age of 55, you can begin withdrawing. We have customers that are with us from the ages of 18 to 80, depending on what it is they need from their pension at that particular point in time.
What do you think is one of the biggest problems within the pension industry at the moment, and what does PensionBee do to address that issue?
I think the problem overall with pensions and the reason pensions exist is to help us save for later on.
The problem is that people aren’t saving enough. That is really the biggest problem.
Part of the reason that people are not saving enough is because it’s too complicated. It’s really confusing to find a way to get started. Often, here’s heavy paperwork involved in order to do simple transactions.
The pensions industry tends to communicate through very, very thick letters that arrive in your mailbox, hopefully if they have your current address and you haven’t moved house. That level of confusion and paralysis in terms of what to do leads to a lot of inertia and people choosing to do nothing for a long period of time. The golden rule with pensions is that the earlier you start, the better. But, if it’s made so difficult to start and so difficult to get transparency over your money, then inevitably, people wake up to the fact that they need to really save into their pensions in their 40s and 50s, by which point, they’ve missed out on a good 20/30 years of investment growth.
I think that confusion and the complexities that have been introduced around pensions is one of the biggest contributors to the savings deficit that we have in the UK.
What’s been the best part of running the business so far?
I think for me, the biggest satisfaction comes from reading the customer reviews.
Within our company communication system, any time a customer leaves us a review, it’s actually blasted across the company. We benefit from an exceptionally high review rating across all of our platforms, whether it’s Trustpilot or the various app stores or Google Reviews.
For us, receiving the feedback of how we have helped our customers, how we’ve simplified their finances and how we’ve made them pension confident is by far the most rewarding thing, for me or for anyone in the company.
Conversely, when we receive a negative review, it gives us something to think about and something to act on from an improvement standpoint. Those reviews are incredibly important to the way that we manage and run PensionBee.
What part of setting up and founding a business over the five years have you found most challenging?
Running a business is relentless, you need to give it everything that you have and there are no boundaries usually between you and your business.
I think that for most people, that is probably the most challenging thing. It’s also, incredibly rewarding and in some ways addictive because it helps you feel like you’re giving purpose. That’s an amazing feeling. But it can be challenging when it comes to your personal life.
Do you think there’s anything the pensions industry can do more to encourage people to start investing in their pension sooner?
Yes. I think a lot of that transformation will happen through investment transparency and people actually seeing what they’re invested in.
Normally, when you invest in a pension, it’s very difficult to know where your money has actually gone. Typically, you need to open several spreadsheets, you need to download a couple of PDFs. Even if you do that, it’s very difficult to actually track your money through to the ultimate companies that you’re invested in.
I think bringing that transparency into the hands of consumer and showing them that the typical pension is invested in the hundred largest companies in the world. Therefore, your pension is invested in Apple and Google and Microsoft, and other companies that people relate to. I think that that will encourage people to think about pensions as investments because you’re giving them the transparency that they are already invested and you’re giving them familiarity with the investments that they hold.
I think that we’re actually quite a faraway away from that in the pension sector in particular because most pensions are actually invested in tracker funds. Those tracker funds are then invested in other tracker funds. So there are levels of investment that occur but we for certain are making progress in terms of making all of that information visible to our customers. I think it will be revolutionary when you’re able to see exactly what your pension is going into.
Are you seeing a big shift in interest in ESG, sustainable and impact investing through PensionBee?
I think that there are several different ways to do ESG and responsible investing right.
We’ve spent a lot of time looking at what the mainstream view is around ethical investing or responsible investing or whatever it is that you want to call it. The majority of people actually have strong views that they do not want their money invested in companies that they think are damaging to society, whether that’s damage to our health or damage to the environment. That is actually a majority-held view.
That however is different to wanting their money to be invested in companies that have been created specifically to make an impact. I think that is different.
While we do have some requests to see money invested in impact-led companies, I would say that that is a view that is still emerging and growing, and perhaps one that will become more common as the certification process around what it means to be an impact-driven company becomes clearer.
I would say certainly, there is a huge appetite to be investing in companies that are not doing harm, which is different. For consumers and for the asset management industry, this is going to be a huge transition into different types of investments, because as we bring that investment transparency to the forefront of consumers’ minds, they’re going to start expressing their preferences in terms of what they want their money to go in.
That is a good thing but it can also be something to be slightly cautious about, because oftentimes, companies that are impact investing may not necessarily be appropriate pension investments. For the pensions industry I think it’s really important that you do maintain exposure to sufficiently liquid investments and investments that are widely traded, which has certainly been our investment view.
Where do see PensionBee fitting in within the investment landscape or traditional pension providers and digital robo-advisors?
We’re obviously very different from Hargreaves Lansdown in that first of all, we’re really simple and easy to use. We are exclusively online and we have a fund offering that I think is curated and manageable, whereas I think one of the primary distinguishing factors about the fund supermarket is that they are supermarkets and they offer several thousand different options for people to invest in.
I think that tends to attract the type of customer who is very interested in choosing between thousands of different funds, whereas we tend to focus on, people who are not necessarily personal finance and investment experts, but who want a pension solution that they are comfortable and happy with, and that they find very easy to use. Our own research indicates that that is actually the vast majority of people in the country. So we bring good value solutions to our customers and we make it easy for them to get those.
We’re different from robo-advisors in that we don’t manage money. The vast majority of robo-advisors that I’ve come across have their own asset management strategy. We’ve taken the view that asset management can be performed by some of the world’s biggest money managers. Especially when it comes to pensions, which is a very long-term investment.
We feel very comfortable and very proud to be working with the world’s largest asset managers, who between them have decades of experience managing money and trillions of pounds of investments already managed on behalf of companies like us, our customers, and in fact, the whole world.
I think that is a really important distinguishing point with pensions because it is such a long-term investment that you entrust your pension company with.
How do your fees compare to other digital pension providers
Our fees range from 0.5% to 0.95%, depending on the plan that you’ve chosen.
Generally, the plan pricing depends on the level of investment complexity involved within the product. You would expect to pay differently for something that has a more active management approach to it, versus something that has a very passive and static approach to it. For us, on any portion of your money over £100,000, you actually pay half the price.
The more you save, the less you pay when it comes to PensionBee.
Is there a book you can recommend that’s helped you personally get more out of your money?
I don’t have a single book that I would recommend. I would say I’m a pretty avid reader of the consumer finance pages in virtually all of the nationals.
I think it’s really about staying up to date and staying current with what is going on in the broader world and how it impacts your investments. I think that there are probably a couple of staple books that people can try.
One good one that comes to mind for younger women, in particular, would be You’re Not Broke You’re Pre-Rich, which I think has had a lot of impact.
Then more recently, Mrs Mummypenny, who you may have come across, has written an excellent book on The Money Guide to Transform Your Life, and that has a very holistic approach to the overall management of your money, which I think is important for people.
If you could give one piece of advice personally to anybody who is starting their investing or saving journey, what would it be?
My biggest piece of advice is to make savings a habit
The earlier you start and the more regularly you do it, the better outcomes you will have over the long term. That’s really what it is about. It is a long-term investment and it is a long-term behavioural approach to leading your life. I think that there’s a lot of cause for optimism and we find 18-year-olds and 20-year-olds and 30-year-olds who have already established the habit of saving.
I think if there’s anything you can teach yourself to do, it’s absolutely that one, and future you will obviously thank you.
Romina Savova is Founder & CEO at PensionBee
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.