Seldom can a job advert have created so much noise as achieved by Monzo, advertising a pension role last week.

No aisle for pensions in the money supermarket

With the exception of Pension Bee, no organisation has successfully challenged the retail pension market from the outside.

Smart and Cushon are successfully creating workplace pension brands which rely on the support of employers, and Cushon might argue that it has a retail presence through its ISA, but even that is primarily a workplace product.

Many have come to the waterhole but few have drunk, the challengers have slunk back to their core business. A few years back Michael Johnson was telling anyone prepared to listen that google were coming, Go Compare, Compare the Market and Money Supermarket have all looked at the pension saving market with the same aims as Monzo and have walked away.

While Pension Bee integrate to Starling and several other challengers, they do not rely on these relationships. It has yet to be proven that consumers will add pensions to their baskets.

Why?

I think that organisations that consider a pension , part of a suite of savings products, are set up to fail. People recognise that pensions are there to meet later life needs and regard them as paid by the state or by their employer (a proxy for a trustee). Private or “personal” pensions have never taken off as a mass market retirement funding device.

People choose to rely on the employer contribution. I was on Lady Lucy yesterday chatting at lunch with a Ukrainian couple about UK taxes (which they thought rather high). They started talking about the “pension tax” and I asked what they meant.

“I mean the amount that comes out of my salary to pay for a pension I may never get”

“So why are you paying, you know you can opt out?”

“Ah but I get money from my employer and I might as well, I may stay in England for ever”.

For most people, it is the link with the employer or Government that validates a pension. Only the most financially self-confident feel comfortable with the personal pension as their primary means of saving.

This is why there is no aisle in the Money Supermarket for pensions.

Consolidation

For the self confident, the personal pension makes sense. Hargreaves Lansdown, SJP, AJ Bell and newcomers, primarily Pension Bee but also Penfold and Open Money have built their businesses around bringing together our pension wealth so that we can get on and spend it or invest it for our family’s future. Vanguard have recently come into the market, intent on mopping up.

Because pension saving is so skewed towards those on high income, with high net disposable wealth, the majority of private savings are concentrated in the wealth management of these few organisations. Many IFAs run small but lucrative businesses providing value at the margin.

This area of pension management is high margin and – because it feeds off social and financial mobility -is highly scalable. It has attracted the attention of private equity and fund managers who share ownership of the wealth managers with the publicly listed Hargreaves, Pension Bee, AJ Bell and SJP.

But – and this is crucial, these organisations have achieved scale not through savings, but through the consolidation of savings – with savers combining pots for easier management.

As a mass market savings product , the personal pension has failed

There remains a variant on the personal pension , the group personal pension or GPP. The original conception for creating a pensions saving culture was established in 1987 when Norman Fowler launched the personal pension to allow savers to do it themselves. Within 10 years, the personal pension was in trouble, it had been used to rip money out of final salary schemes and had no controls on the product, so people started seeing it as a rip-off product used for pension mis-selling.

To put this right , the personal pension was re-purposed as a stakeholder pension which was designed as a payroll funded product with guarantees on charges and a default investment product that made it look more acceptable to a sceptical public

The RDR and auto-enrolment made the personal pension as a savings mechanism redundant. Without the capacity to make money from commission on the sale, advisers stopped selling personal pensions, which is why self-provision from the self-employed has plummeted.

But the GPP, what’s left of the stakeholder revolution, survives. It isn’t being promoted by anyone anymore, but it is embedded as the workplace pension in some huge schemes such as Asdao, SUEZ and British Telecom’s workplace pension.

These monolithic GPPs are increasingly looking a mistake. For while they work for the few sophisticated savers that can use them for consolidation, they are not getting the product development that’s going into the workplace DC master trusts. Increasingly they are looking the insurer’s workplace pension legacy product.

So what future for Monzo and other challengers?

The advert suggests Monzo are at the water hole, looking around. The product manager may find a way to link to Pension Bee, Penfold and a few other successful consolidators, but beyond that, the chances of challenging the existing wealth sector look slim. Vanguard is already there feeding on the scraps left by Hargreaves and others.

The advantages that challengers bring are mainly based on their not having a legacy. But while not having a legacy works in terms of quality of service, it makes life deeply difficult on the financial side. Any new entrant has to compete with existing players who have assets valued in billions if not hundreds of billions of pounds.

And worse, all the evidence from Government suggests that the pensions agenda will be dominated by collective pensions, with VFM being the catch acronym.

The Monzo advert has attracted attention not as a threat, but because pensions have moved on and what might have been an interesting job, now looks a graveyard slot.

Personal pensions are cooked as a mass market product and there’s a vast pile of discarded propositions that never got scale, there to prove it. Monzo’s may be the next.