How yesterday’s fusion of Cushon into NatWest was announced.

Cushon has reached an agreement with NatWest Group for them to acquire a majority shareholding in Cushon.  A minority shareholding (15%) will remain with Ben Pollard, CEO and Founder and other senior management. 

Cushon, a great British Fintech

The story of Cushon is extraordinary. Here’s Cushon’s co-founder Phil Hollingdale explaining.

It’s 5 ½ years since I teamed up with Ben Pollard and co-founded Cushon (formerly known as Smarterly). We started in a serviced office in Leatherhead, with Ben’s wife Sarah-Jane Pollard Jane and Ben Hollingdale as head of sales. A small team, limited resources but big ambitions. We quickly moved to London where we started to build the team, having secured investment from angel investors, followed almost a year later with crowdfunding.

Today, Cushon is a team of c.150 people, managing £1.8bn assets on behalf of 500,000 people. It’s a great business and will prosper even further in the hands of NatWest.

Cushon was my sixth tech start up (as a founder or co-founder) and I’ve really enjoyed it. It was tough going at times, but great fun being a disruptor and the first of the digital wealth platforms in the workplace. I’m proud of what we achieved.

A BIG thank you to all of Team Cushon, especially those who joined us in the early days when we couldn’t afford to pay very much.

And thank you to all of the people who invested in Cushon. Without your trust and funding we wouldn’t be where we are today.

Congratulations Cushon, you are a great British Fintech and it’s good to see that those who invested early will now be rewarded.

So what is NatWest buying?

Cushon is a still a master trust of mastertrusts, it has – since buying Salvus, gone on to buy the Workers Pension Trust and the Creative Master Trust with the help of an initial  £6m funding  from Augmentum Fintech (subsequently topped up to £11m)   and  a £2om credit facility from  Ashgrove Capital put in place in 2021.

Augmentum is expected to receive proceeds of £22.8m from the completion of the acquisition, representing a 46.2% uplift on the unaudited 30 September 2022 holding value of £15.6 million, a multiple of 2.1x on cost and an IRR of 66.3%.

You don’t get this degree of growth without annoying a few people and Cushon have been disrupting not just the established master trusts but disruptors like Smart. They are no angels but they have found ways to collaborate with much larger institutions and are now standing on the shoulders of a giant.

Cushon offers technology that helps employers offer their staff more than a pension. It’s platform is clearly attractive to NatWest who can at last claim to have something more to offer its smaller clients than banking. Cushon has some strategic potential. But Cushon are suggesting  that it is  not being bought for cross-selling but as a means for RBS to diversify its sources of UK income as a standalone investment.

A great British bank?

In the earliest  days when auto-enrolment was yet to be a thing, the retail banks, especially those with strong links into small and medium sixed employers, were expected to challenge Nest and build workplace pensions “leveraging their banking relationships”.

But then came the banking crisis, state ownership and in the case of RBS (NatWest) humiliating revelations about how the bank has “abused their banking relationships” with the small business community.

For the past fifteen years, few have referred to RBS NatWest as a great British bank. From basket case it has recovered some ground but it has shown no interest in pensions during auto-enrolment staging.

The acquisition of Cushon could be seen as  part of the charm offensive NatWest is waging, Cushon , if not on  the side of the angels, are at least on the side of the planet.

Three out of four of the high street banks now own or have a majority interest in a master trust. HSBC decided to build their own and a fine thing they’ve built, it will be the better when it has customers. Lloyds Banking Group bought Scottish Widows which bought the Zurich Master Trust. It has also bought Embark which competes with Cushon as an employee benefit platform.  Barclays alone has yet to play its hand – having had several attempts at getting a foot into corporate pensions.

What does this mean for workplace pensions?

The acquisition will make waves in pension circles but it hasn’t made the pages of the FT this morning. Cushon has swapped backers and have access to banker’s pockets, but this deal is part of a longer term move to create value through the long-term income streams from pensions.  It looks a sounder move than LDI.

Cushon will now have increased credibility as a consolidator and will be taken more seriously by the asset management industry who are beginning to get excited about workplace pensions as a source of value.

It will be interesting to see whether the large benefit consultancies who currently act as gatekeepers to the big deals, will upgrade Cushon , if they do  – then the disruptor will have become mainstream , much as People’s Pension and Smart have.

The question the market should be asking is whether Cushon now aspire to be “me too” or will continue to innovate. I hope that the answer is that Cushon will continue to drive up standards as they have done to date.

Pressing on not sitting back

We do not need reassurance from Cushon, we need more of what we’ve had so far!

In an email to stakeholders, Cushon says that

once regulatory approval has been received and the acquisition is complete, other than a change in shareholding, nothing will change with the service and products we provide to clients and their employees.

I hope that this isn’t the case.

We need progressive master trusts to improve their service and products. Many of Cushon’s members are over 55 and have no obvious means of turning pot to pension, there is plenty of scope for improvement and it would be a shame if Cushon pegged its level of ambition at current levels.

The danger for workplace pensions is that NatWest will stifle the innovation that Cushon has shown so far, BAU at Cushon must be to lead and not to sit back and luxuriate.

The British government currently owns around 48.1%, previously 54.7% of NatWest Group after spending £45 billion ($61.87 billion) bailing out the lender in 2008. We now own a good chunk of Cushon and all of Nest, I’m looking forward to getting some value for my money!

Ben Pollard – the driving force behind Cushon’s remarkable growth.