PensionBee boss: Britons aren’t all letting their pensions go to pot

Plan: Romina Savova wants to drive PensionBee’s profitability in London

You might think retirement savings would be first in the firing line when the cost-of-living crisis hit. Not so, says the boss of PensionBee, one of Britain’s biggest online pension providers. At least, not for her customers.

Romina Savova, who floated her online pension app PensionBee at the height of the pandemic, claims despite ongoing pressures on the piggy bank, Britons are still keeping an eye on their golden years.

Founded in 2014, PensionBee is an app that pools together pension contributions into one place, allowing users to contribute whatever amount they like and start withdrawing funds when they hit 55.

Savova, 37, who was eager to show off the app when we met in a West London cafe, said recent economic hardship had put personal finances into ‘sharp focus’.

‘I think very early on [in the crisis], the conversation had been around electricity bills, mortgage rates, but actually, being on top of your finances, and making sure you are well protected for the future is becoming increasingly important to consumers,’ she said.

Savova’s comments sit in stark contrast to recent data from the Pensions Management Institute (PMI) that found millions were abandoning payments into their retirement pots.

A fifth of employees had already reduced their pension contributions or opted out completely in the past 12 months, while another 20 per cent were considering doing so this year.

The Bulgarian-born businesswoman said she didn’t see this trend playing out in her one million-strong customer base. Last year, 15 per cent of users actually increased their rate of saving and only 6 per cent reduced it, she said. This was the same rate as in 2020, showing no significant impact of tightening purse strings.

One effect is that people who are taking their pensions are withdrawing money less frequently, hoping to make their savings go further.

‘I think there are economic anxieties about the long term and that certainly impacts the average withdrawal because what is on your mind is how to make this pension pot last,’ she explained.

According to her figures, the average monthly contribution jumped from £507 a month in 2020 to £628 in 2022, whilst withdrawals dropped significantly as we hit 2022. But experts warn not all of PensionBee’s trends can translate into the wider UK economy.

The argument is that PensionBee customers are already savvier and wealthier than the majority of Britons, meaning that their habits, including for ‘longer term planning,’ are probably not entirely representative of a society feeling the sting of rocketing inflation.

Another trend Savova highlighted was the shift towards semi-retirement, where people continue to work whilst receiving pension payments. ‘There’s definitely a period in your 50s and 60s that doesn’t look like what a traditional retirement used to look like,’ Savova said.

Recent research suggests more people are considering employment in retirement, to top up their disposable income and to keep active.

But again, this sits in contrast to the narrative that has dominated headlines in recent months about the flurry of people who took early retirement in the wake of the pandemic. Not only has this raised alarm bells for politicians about the state of the economy, with Rishi Sunak trying to coax over-50s back to work with a ‘midlife MOT’, but it is also problematic for people trying to live comfortably into old age. The main question being how these pension pots will last.

The good thing for Savova is that her business is all about flexibility.

The free app puts people’s pensions all in one place, making the process of withdrawals and contributions more transparent. The company makes money by taking a regular management fee.

The concept also makes sense in a world where we are expected to have more jobs than ever before. A recent LinkedIn study of more than 20,000 workers found a quarter of people under 26 hoped or planned to leave their current employers within the next six months.

Savova started her own career at Goldman Sachs just before the financial crisis, later jumping to the pensions team at Morgan Stanley and then a tech start-up, Credit Benchmark. Born in communist Bulgaria, Savova has also lived in South Africa, the US and now London. Her globetrotting, particularly time in America where she studied at Harvard, left her fascinated by political systems and macroeconomics. But the idea for PensionBee came from the complexity of her own pension arrangements.

Although the firm hopes to inspire ‘pension confidence’, the industry meltdown in September undoubtedly knocked the sector. Savova said the pension crisis ‘highlights the interconnectedness within the financial system,’ which she said, ‘demonstrates the importance of strong diversification within pension investments’ – something that PensionBee’s defined contribution pension investments benefit from.

These are pensions that are based on how much is paid in by individuals, whilst defined benefit schemes are usually workplace pensions that are based on salary and how long you’ve worked at a firm.

Despite the mini-Budget induced blip mainly hitting defined benefit schemes, there is perhaps no coincidence that PensionBee’s share price took a hit. Since the company floated in 2021, shares have tanked more than 60 per cent, shaving about £200 million from the firm’s initial £365 million valuation.

Savova, who continues to hold a sizable stake in PensionBee, batted away the recent plunge as a side effect of being a ‘high growth company’. ‘By definition we are not looking at the short-term horizon, we are focused on the long-term horizon,’ she said.

PensionBee’s latest full-year results show the average pension pot size of new customers fell in 2022 and new customer numbers grew less than analysts expected.

That said, Bank of America noted the improved profitability was a ‘good outcome from a difficult year’. ‘PensionBee requires patience, but we think it is at the cusp of profitability, and will reward investors’ patience,’ the investment bank wrote.

For Savova, the London market is the ideal spot to drive this profitability and she sits as one of the very few female tech founders – something she says ‘we need to call out or will never change’.

‘The lack of female role models in tech is a barrier and burden,’ she told The Mail on Sunday, but added she felt ‘conflicted’ about how this gender balance could be addressed.

As a working mum, she juggles running the company with raising three children. On whether she would consider selling after growing the £142 million firm, she said: ‘You can never rule anything out.’