This week I have something a little different: a review!
A year ago I set up a handful of “experiments” where I deposited smallish amounts of money into various places with the view of writing about the process. (Yes, I really do start planning Money Talk content that far in advance.)
To be clear, these were financial decisions I would have made anyway, but the timing and amounts were designed to make comparison easier.
I’ll cover all of these in the next few weeks but first, my review of PensionBee.
There are quite a few elements here so it’s going to be a three-parter, with an overview of how things work in practice next week, and an update on how my pension is performing and my verdict rounding off the mini series.
By the way, this review is my experience and personal opinion only and shouldn’t constitute financial advice. For that, you would need to go to someone who’s regulated by the Financial Conduct Authority, who can tailor their advice to your situation.
What is PensionBee all about?
Founded in 2014 (but launched in 2016), PensionBee is a challenger to the – let’s be honest – pretty stagnant market for pension providers.
Its whole ethos is that setting up a pension should be simple, and it’s tried to do that by making the process of finding scattered pension pots and merging them into one as easy as possible.
So if you need a hand finding “lost” pension pots, PensionBee will come in pretty handy.
Unlike some of the more traditional pension providers such as Scottish Widows, PensionBee doesn’t manage your money.
Instead, it partners with some well known money managers – including BlackRock, State Street Global Advisors, HSBC and Legal & General – to do that.
In other words, they provide the tech but the experts do all the hard work. Your money is also protected under the Financial Services Compensation Scheme (FSCS).
Currently PensionBee is a publicly listed company – it made its debut on the stock market in April 2021 – which means you can buy and sell their shares.
Why I went with PensionBee
When I went freelance at the beginning of 2021, one of the things I wanted to sort out was my pension.
I had worked for so many different employers in the past decade that I had all of these different pension pots just lying around.
Concerned about the fees that I might be paying on smaller pots, I decided that I wanted to merge them.
If nothing else, it would mean I could see them all in one place, which hopefully in turn means they’re much easier to manage.
But not all pension providers are open to freelancers, and not all of them allow lump sum deposits (rather than regular contributions), which is what I need to ease cashflow.
PensionBee struck a chord because it seemingly targeted freelancers, made merging pensions easy and allowed lump sum deposits.
It also offered one of the more competitive rates on the market for its management fees.
There were a lot of similar products on the market though so I must admit, the thing that cinched it for me was that at the time, TopCashback* was offering a great cashback deal when you transferred your pension in (more on that next week).
A breakdown of PensionBee fees
PensionBee currently offers seven different pension plans – Tracker, Tailored, Fossil Fuel Free, 4Plus (aiming for 4% growth), Shariah, Preserve and Pre-Annuity – each with its own fee and product manager.
Annual management fees start from 0.50% to 0.95% depending on which plan you pick. These are pretty standard across the industry.
Like other pension providers and investment platforms, if you have a portfolio over a certain size, in this case over £100,000, the fees drop.
You may be charged a transaction fee for certain investments, which PensionBee says ranges between -0.02% to 0.09%. This is also standard practice in the industry.
However, this fee isn’t shown on statements explicitly – it just reduces the overall growth of your investment (PensionBee’s explanation here).
Why I went with the Tracker plan
After looking at all of the options, I decided to go for the Tracker plan, which is managed by State Street Global Advisors (SSGA), one of the world’s largest asset managers.
It had the lowest fee, and the investment approach broadly matched my needs.
The type of investment leaned towards equities (shares), which tends to be more volatile with more chance of reward, with a decent percentage in more stable investments (cash and fixed income).
The location of the investment is focused on developed countries, with a bigger slice in North America, followed by the UK, Europe and finally Asia, so there’s good exposure to different markets, which should help balance out any region-specific volatility.
Plus, its past performance has generally trended upwards – although of course this is no indication of future returns, as I’ll explain in the final week.
In terms of overall risk, currently PensionBee has designated it a medium.
For context, my investments elsewhere are set to high or very high because I’m at the stage (and age) in my life where I can afford to be a bit more risky as there’s time for portfolio growth to catch up by the time I retire in about 30 years’ time.
I also have a very mixed asset portfolio, because you know what they say about all your eggs in one basket.
And as I expect to use my money in the next five years to pay off my mortgage – and I don’t have a huge amount of disposable income – I’ve made a point of limiting the amount of money I’ve invested or set aside for pensions or LISAs.
So, I hit the apply button and initiated the transfer. Sadly, it wasn’t all quite as straightforward as I had hoped – but more on that next week.