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PensionBee looks profitable – should you buy in?
PensionBee has carved out a profitable niche for itself by consolidating retirement pots. Its growth trajectory will reach an inflexion point next year
UK fintech PensionBee (LSE: PBEE)has carved out a successful niche for itself, to become the UK's most recognised pension consolidator with the UK pensions sector undergoing a major transformation over the last ten years.
Following the introduction of the Auto Enrolment scheme in 2012, assets in defined-contribution (DC) schemes have exploded, and the pensions industry has rapidly had to adapt to this new norm. The DC pension market has two main segments: workplace schemes and personal or individual wrappers. The latter is dominated by the self-invested personal pension (SIPP) market and the consolidation of legacy workplace schemes. This market is worth around £600 billion and is growing.
The larger workplace-scheme segment is far bigger and more complex. The government is pushing through regulations to consolidate this market, with a goal of consolidating pots into £25 billion-plus mega funds. Although the market has consolidated significantly over the past ten years, hundreds of schemes remain, some with as few as 100 members, which can add cost and complexity.
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Auto-enrolment is widely recognised as one of the most successful pension reforms worldwide. Under the current rules, an employer must enrol an employee in a pension scheme if they are a UK resident, work in the UK, are aged over 22 and earn more than £10,000. The minimum contribution is 8% of salary, 5% from employees and 3% from the employer.
Employers can pick one of two approaches: either a contract-based approach, or a trust-based scheme. Under a contract-based scheme, individual contracts are agreed between the scheme member (the company) and the pension provider, usually an insurance company or investment platform. With a trust scheme, the company agrees a relationship with a large pension master trust, such as Nest or the People's Pension.
Auto-enrolment has greatly reduced the burden on employers of setting up pensions for employees. It also helps employees save for the future, as they are, as the name suggests, auto-enrolled in the scheme and contributions scale up with wage growth. But people do switch jobs regularly throughout their career and due to the fragmented nature of the industry, there's no guarantee your next employer will be able to offer access to the same scheme as you had previously.
How PensionBee consolidates retirement pots
PensionBee markets itself primarily as a pension-consolidation platform, but it also provides private-pension schemes, such as those for the self-employed. It does not manage the underlying investments itself, but takes a platform fee and partners with institutional giants such as BlackRock, State Street and HSBC to provide a range of low-cost funds.
PensionBee's real edge is its technology platform. Pension transfers and consolidation can be costly and time-consuming. PensionBee aims to complete electronic transfers within two weeks, although more complex transactions can take longer. The company's focus on technology, marketing and simplicity has really resonated with consumers. It estimates it generates around £100 of net asset inflows for every £1 it spends on marketing. It has a 57% brand-awareness score among consumers, one of the highest among pension brands, and customer retention of 95%.
The last time I covered the company in early 2022, it had just reported £5.8 billion in assets under management. According to its latest half-year results, that figure has grown to £8.6 billion of assets under administration across 327,000 invested customers.
With exposure in both the UK and US, the firm operates across markets representing more than $30 trillion in retirement assets. Currently, the US market is still tiny, with less than $5 million of assets under management. However, the company is in talks with more than 100 intermediaries and has an estimated $1 billion in potential recurring annual inflows over the medium term from this business line. This growth should be relatively inexpensive as it has already spent heavily on the technology it needs. As a result, most of its day-to-day spending is now on marketing, plus select technological improvements. PensionBee should be able to scale quickly and efficiently.
Profitability is in sight for PensionBee
(Image credit: Future)
In the first half of its 2026 financial year, the firm reported group adjusted Ebitda of -£1.1 million. The UK market alone generated adjusted Ebitda at £1.5m million in the first half or £7.5 million over the last 12 months.
According to estimates compiled by analysts at Peel Hunt, the company is expected to report adjusted Ebitda of £0.5 million for the full year across all markets. Analysts believe PensionBee will achieve sustainable profitability from 2027 onwards and reach management's 20% adjusted Ebitda margin by 2029.
PensionBee is still a small-scale business in a large market with much bigger and deeper-pocketed competitors. However, the opportunity should not be understated. Peel Hunt believes the firm will report £1.5 million of adjusted Ebitda by 2027 and then £8.08 million by 2028, as the group finally reaches an inflexion point in its growth. Sales are expected to rise from £43 million for 2025 to £83 million by 2028, according to Berenberg, as assets under management rise to near £13 billion. Canaccord Genuity has similar figures.
If the company hits these targets, it could achieve a return on invested capital of 34.5% by 2028. If there's one number that illustrates just how profitable PensionBee could be at scale, it's this. The next few years could transform its fortunes.
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Contributor and former deputy digital editor of MoneyWeek
Rupert is the former deputy digital editor of MoneyWeek. He's an active investor and has always been fascinated by the world of business and investing. His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks.
Rupert has written for many UK and international publications including the Motley Fool, Gurufocus and ValueWalk, aimed at a range of readers; from the first timers to experienced high-net-worth individuals. Rupert has also founded and managed several businesses, including the New York-based hedge fund newsletter, Hidden Value Stocks. He has written over 20 ebooks and appeared as an expert commentator on the BBC World Service.
