Penfold, a startup that offers a full-stack pension in a smartphone app, has closed an $8.5 million (£6 million) funding round, $4 million of which was from a crowdfunding campaign. The company is now approved by the FCA to operate a pension itself rather than relying on third parties and is aimed at freelancers who rarely save. The round was led by Bridford Group.
Penfold says it built the back-end infrastructure “from scratch,” CEO Pete Hykin told me. He said legacy providers are built up from “100s of consolidated schemes” and are often still paper-based and require an army of people to administer. Thus a tech-driven approach means fewer overheads and the ability to make an attractive offer to freelancers.
Hykin continued: “I was self-employed for two years so had no pension. I tried five times to set one up with Scottish Widows, Standard Life, AJ Bell, etc. I gave up, as all of them forced you to print something, call them or speak to an IFA. At a previous company, I set up a workplace pension for 70 staff and none of them engaged. Many left money on the table as a result.
“We rebuilt the entire back end of pensions so all processes can happen instantly, quick, flexibly and at a low cost. Then we put an amazing UX on it via a great app and amazing human customer service.” Features include search, track and consolidate old pensions, among others.
Hykin said users download the app, enter bare minimum legal details for KYC, choose one of five investment plans based on age/risk appetite, choose how to fund (recurring direct debit, open banking top up or transfer another pension). Then they receive HMRC 25% top ups until retirement.
A “Find my pension” tool is possibly the most powerful feature of this startup, where you put in the name of your old employer and it tracks down your old pension pot.
Its competitors include traditional providers such as Standard Life, Scottish Widows, Aviva and AJ Bell.
Pensions are definitely heading to apps. PensionBee recently arrived on the London Stock Exchange, for instance. PensionBee also recently announced self-employed offering.
Users will be charged an annual percentage fee on their pension balance (0.75%), but with no other fees. The other founders are Chris Eastwood (co-founder and co-CEO) and Stuart Robinson (co-founder and CTO).