Planning for retirement is an important financial goal for most savers. Yet the complexity of pensions means that many remain uncertain about their options.
In recent years, we have seen a welcome focus on simplifying pensions and giving savers control over their money.
The app PensionBee has been creating a splash after it was valued at as much as £384 million ahead of its debut on the London Stock Exchange on Monday.
The Pensionbee app, founded by former banker Romi Savova (pictured), has been praised by some personal finance experts for its user-friendly interface and simple fee structure
It allows savers to combine all their pensions in one pot, and has been praised by some experts for its user-friendly interface and simple fee structure.
The company has grown significantly since its launch in 2014, with 130,000 customers consolidating savings worth £1.5 billion.
But could it help you get your savings in shape for retirement?
How it works
Pensionbee was founded by 35-year-old ex-banker Romi Savova, with the aim of making it easier to locate and consolidate pension plans.
It is a simplified version of a Sipp – a self-invested personal pension. The main difference is, instead of taking control of the investment process, customers choose one of nine pension plans.
These plans are not run by PensionBee, but by established pension providers, including HSBC, BlackRock and Legal & General.
Each plan is subject to a preset annual charge – currently between 0.5 per cent and 0.95 per cent on the first £100,000, and half of this on anything over the threshold.
A pot of £150,000 invested in the tracker plan would have an annual charge of £625.
Tricky made easy
The app looks to reduce the admin of pension management by automatically contacting your providers on your behalf (once you have given their details).
Its website also explains how you can check for missing pensions, including via the Pension Tracing Service.
Once your money has been transferred, PensionBee provides a simple interface to keep tabs on your savings, make additional contributions or get an idea of how far your pot will go when you retire.
Though it doesn’t provide advice, it does have some safeguards to protect customers when it comes to transferring pensions.
Lost pots: Pensionbee’s website also explains how you can check for missing pensions, including via the Pension Tracing Service
Whether or not consolidation is a good idea likely depends on what kind of pensions you hold.
Experts are wary when it comes to transferring so-called defined benefit pensions — the kind that used to be common in the public sector.
As these pensions guarantee a set income based on length of membership, the implications of transferring out can be severe.
You are essentially giving up a guaranteed income, including protection against inflation, in return for an uncertain sum.
The Government has brought in strict rules requiring anyone to obtain independent advice before transferring such a pension.
For defined contribution pensions, where you invest a regular amount, the situation is very different. Most experts agree there can be benefits from consolidation — particularly if you hold several different pots.
These may include lower fees, better performance or just making it easier to stay on top of your savings.
Even if the numbers add up, transferring might not always be risk-free. With withdrawals from pensions worth less than £10,000 treated differently under tax-free annual allowance rules, there can be advantages to keeping individual pots.
It’S worth checking what existing providers offer. Thanks to government and market pressure, many pension firms have improved their services, introducing their own online platforms and simplifying fees.
You should also look carefully at what else is out there and consider which option best suits your circumstances.
Unlike more established platforms, PensionBee does not offer financial advice. That may be a drawback for anyone planning to take income from their pension soon.
More experienced investors may prefer a standard Sipp, or the kind offered by retail investment platforms, which provide more flexibility than the ‘one-stop shop’ approach of PensionBee. As always, pay close attention to the fees too — as these can greatly affect returns over time.
PensionBee’s fees are cheaper than the industry average of 1.09 per cent, but some platforms offer lower rates on larger pots.
The investment platform Interactive Investor, for example, has a flat-fee structure, meaning that someone investing £150,000 over 20 years could be significantly better off.
Do your research
There are some free services that can better help you understand your retirement options.
The Government’s Pension Tracing Service helps you find the details of any pensions of which you might have lost track.
With an estimated £400 million in unclaimed savings, it is worth checking if you are among those affected.
The Government is also looking to introduce its own Pensions Dashboard, which will give savers oversight of their different pensions.
Originally promised for 2019, the dashboard has now been delayed until 2023 — much to the frustration of campaigners.
In the meantime, it’s a gap that platforms such as PensionBee are more than happy to fill.
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