PensionBee, a leading online pension provider, has launched its range of ready-made investment solutions in partnership with State Street Global Advisors, one of the world’s largest money managers. The four plans are specially designed for non-advised consumers intending to draw an income from their pensions, and meet four clear retirement objectives.
The Tracker Plan is an option for savers with no plans to withdraw their money in the next five years, and invests in global shares and bonds, following the world’s markets as they move. The Pre-Annuity Plan invests money in bonds to provide returns that broadly correspond to the cost of purchasing an annuity, and is designed for those who plan to use their money to set up a guaranteed income (annuity) within the next five years.
The 4Plus Plan is an option for savers who plan to start taking their pension as a long-term income within the next five years, and aims to achieve long-term growth of 4% per year, by actively managing money across a range of investments. The Preserve Plan makes short-term investments into creditworthy companies with the aim of reducing risk and preserving money, and is designed for those who plan to withdraw all of their savings within the next five years.
Investment Pathways are a Financial Conduct Authority initiative designed to improve retirement outcomes for consumers who wish to enter income drawdown, but have no desire to seek financial advice before doing so (1).
With Investment Pathways, savers can choose from four distinct options depending on their retirement objectives, and how they plan to use their pension in the next five years.
PensionBee’s four Investment Pathways are as follows:
| Retirement objective | PensionBee Investment Pathway | Annual management fee |
|---|---|---|
| I have no plans to touch my money in the next 5 years | Tracker | 0.50% |
| I plan to use my money to set up a guaranteed income (annuity) within the next 5 years | Pre-Annuity | 0.70% |
| I plan to start taking my money as a long-term income within the next 5 years | 4Plus | 0.95% |
| I plan to take out all my money within the next 5 years | Preserve | 0.50% |
PensionBee is among the first to market with Investment Pathways, ahead of the Financial Conduct Authority’s Investment Pathways implementation deadline of February 2021, delayed from August 2020 due to COVID-19. PensionBee appointed the PTL governance advisory arrangement (GAA) to assess the design and implementation of its investment pathways solutions. PTL also assessed the pathways’ value for money and ESG factors.
Research conducted by PensionBee earlier this year found that the desire to withdraw the entire 25% tax-free lump sum acts as an important anchor for savers, even if they do not have a need for it or a plan for what to do with it. The survey of c.1,000 members of the general public, also found that around a quarter of consumers who took the 25% tax-free lump sum put some of the money into a current or savings account to save for a rainy day, where it had limited opportunity for growth (2).
Clare Reilly, Chief Engagement Officer, at PensionBee, commented: “We’re pleased to build on our existing partnership with State Street Global Advisors and are excited to introduce our Investment Pathways plans. PensionBee welcomes regulation that both improves retirement outcomes and simplifies an overly complex market that is not set up to serve consumers. As we saw in the findings from our Drawdown Doldrums report, in its current state the non-advised drawdown market is confusing, expensive and lacking in innovation. At PensionBee we support well-governed defaults as a way to ensure that savers have good retirement outcomes that meet their objectives. Like all of PensionBee’s products, our Investment Pathways plans are good-value, appropriately diversified, easy to understand and appropriate for all types of savers.”
Alistair Byrne, Head of Retirement Strategy, at State Street Global Advisors, commented: “Investment Pathways are an important development in helping people approaching retirement to navigate the pensions freedoms. We were delighted to work with PensionBee to implement a set of effective and value for money pathways to help their customers achieve successful retirement outcomes, building on the wider long-term partnership we have established.”
Appendix
Table 1: Motivation for accessing a DC pension
| Reason for considering withdrawal | Proportion of consumers (%) |
|---|---|
| Due to worry about the pension falling in value | 32% |
| To take control and put it in a savings account or other investments | 20% |
| After hearing about government rule changes | 20% |
| For extra income to meet day to day expenses | 17% |
| Due to pressure to do something with it | 12% |
| To spend it on something special | 9% |
| Due to not trusting their pension provider | 5% |
| Due to charges being too high | 4% |
| Due to retiring or stopping work | 3% |
Source: PensionBee, April 2020. Figures have been rounded to the nearest percentage. Respondents could select multiple answers.
