Thoughts on Pension Bee’s valuation

 

My favorite moment of 2021 was sitting outside on the steps leading into the Barbican with Clare Reilly and Romi Samova. Pension Bee had announced its valuation and we had a (now legal) glass of wine in hand.

The conversation turned to conventional valuations, what Pension Bee refer to as “community adjusted Ebitda”. While Pension Bee takes its own valuation very seriously, it takes the method the financial community has adopted for value with a pinch of salt.

This financial heresy from an alumni of Goldman Sachs and Morgan Stanley will shock many financial analysts, but yesterday’s heresy is today’s disruption. Pension Bee’s valuation is based on a business that has caught the popular imagination as no pension company in my working lifetime.

I see Pension Bee’s use of a full listing on the London Stock Exchange as a clear signal that they intend to be a major force in UK pensions and I take their valuation seriously too.


David tweet was followed by similar contributions from a number of other IFAs, whose financial practices are typically valued at 11 or 12 times earnings. This compares to the 60 times earnings valuation of Pension Bee – Ebit-lah-de-dah indeed.


Why the price?

Pension Bee has 12,000 savers expressing a wish to buy its shares, that’s just over one in ten of its client base. Clients are fans and trust pilot ratings for Pension Bee back up the esteem the customer service provided by the Bee-keepers is held in. Quality of service is one of the three legs of the customer’s three legged stool but its critical to profitability.

Value for Money

Pension Bee is not as “cheap” as Vanguard or one or two other non-advised Sipps but its value derives not just from its service proposition  but from the performance testing of its funds. A large proportion of the money invested in Pension Bee is finding its way into overtly green funds – most notably LGIM’s FutureWorld and now the LGIM fossil free fund – a fund which was created to meet demand of Pension Bee’s policyholder’s. The performance of FutureWorld in particular meant that AgeWage was able to accord Pension Bee one of its highest value for money scores based on an analysis of benchmarked performance.

Campaigning

Pension Bee has , since its early days (way back at inception in 2015) campaigned to make pension more open and transparent. Its famous war against providers delaying the transfer of their assets to Pension Bee culminated in its notorious “Robin Hood index” which named and shamed culprits.  Pension Bee, rather than being outside the fold, have now joined the ABI and are a key player in the Origo exchange but they are far from easy bedfellows for the 12 largest pension providers who Savova claim account for 80% of the pension pots in Britain today. Pension Bee campaign for open pensions and the free flow of data to consolidators via APIs in advance of the formal launch of the pension dashboard. Working with fintech lobbyist Coadec, they are passionate consumer advocates of better information for the customer.

Their latest battle is to get MaPS to take ownership of the inadequacies of its investment pathway comparison site. Pension Bee’s intrepid bid to take on vested interests and win, is earning it a place in the hearts of many and accounts for the support for the valuation from outside the pensions industry. I get the distinct feeling that the public trust Pension Bee to be on its side.

Opportunity

The failure of the pensions industry to deliver a service into people’s pockets has created an opportunity for a tech-savvy organization to mobilise large parts of the UK savings market who want to save their way. Their is nothing gimmicky about Pensions Bee, it simply works as an app and does the kind of things in the kind of way you’d expect from Starling, Monzo and Revolut.

If those names mean little to you, then you are not going to be using Pension Bee, but for the newly affluent generations entering the workforce in this millennium, Pension Bee is the natural consolidator of workplace savings and the recipient of tax-advantaged contributions flowing through open banking.

It is the failure of the established players to reinvent themselves as relevant for this younger market which has spurred Pension Bee’s success so far. It had about 137,000 active customers as of the end of March, up 77 per cent from a year earlier, according to a trading update it published alongside its flotation price range. The increase in clients drove a 123 per cent year-on-year rise in its assets under administration to £1.65 billion.

The trajectory of its growth is remarkable for it being organic. Pension Bee is not buying up books of business as the life company consolidators do. It is not dependent on third party distribution as most Sipps are.

Unlike other non-advised SIPPS it does not hold itself out as a funds platform. It has no legacy of governance failures either in terms of pricing transparency or of cronyism. It has never carried Woodford funds on its platform, sticking to pooled funds produced by BlackRock, State Street and LGIM.

Its focus is very much on providing people with retirement income – it is not so much a wealth manager as a wealth replacer , playing to people’s insecurity about later life finances by offering a simple product that can be accessed by a tool in the pocket or bag.


No secret – I’m a fan

I am no expert on stock market valuations. I am impressed that Pension Bee is looking for a listing in the High Growth sector of the London Stock Exchange. The success it has achieved and will achieve through raising £55m of new capital, is welcome news for those who want to improve the image of pensions.

Pension Bee is a powerful voice for change in the way pension investments  are managed , pension information delivered and in the way people can be empowered to save more for longer.

It is a company that practices what it preaches in the way it is constructed and governed.

Its success opens the doors for others and far from evidencing a bubble, I believe its valuation reflects the massive demand for change in the way we can save for retirement.

 

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Thoughts on Pension Bee’s valuation

  1. Adrian Boulding says:

    When Government legislate for and implement the Master Pot solution to the small pots crisis, the app-lovers in this article will be able to select Pension Bee as their automatic consolidator and see all their future deferred workplace pots automatically added to their Pension Bee account. The strength of the Master Pot idea is that it supports BOTH workplace auto-enrolment AND individual choice and responsibility.

  2. Eugen N says:

    Valuations of small businesses where growth is the most important part of the valuation calculation are hard to do.

    In “value investing” we are told to be sceptic of “too good to be true”. Warren Buffett has the “too hard box” on his desk for companies which he cannot value!

    So I will pass on this and let other people get in.

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