PensionBee Group plc

Full Year Results for the year ended 31 December 2022

Strong Growth across all Key Metrics and on track for

achievement of Ongoing Adjusted EBITDA Profitability by the end of 2023

PensionBee Group plc ('PensionBee' or the 'Company'), a leading online pension provider, today announces its audited full year results for the year ended 31 December 2022.

Highlights

Romi Savova, Chief Executive Officer of PensionBee, commented:

"We are pleased to report strong full year results for 2022, having exceeded £3 billion of Assets under Administration, despite the challenging global capital markets. PensionBee has become a household brand name, synonymous with easy and effective pensions management for consumers.

Throughout 2022, we focused on serving our customers through innovative product developments and launches, supporting them through this uncertain economic environment. We look forward to continuing to acquire market share and to achieving our objective of reaching 1 million Invested Customers in the medium to long term. We expect to introduce some new, adjacent products to enable our customers to prepare for a happy retirement.

Encouraged by strong year to date trading driven by customer growth and healthy net flows from new and existing customers, we are on track to achieve our primary objective of ongoing Adjusted EBITDA profitability by the end of 2023 and to become profitable for the full year 2024. We will achieve this by continuing to reduce the Cost per Invested Customer, delivering innovative new features and making efficiency gains through our scalable technology platform."

Guidance and Outlook

With PensionBee having delivered against its primary growth objectives and financial guidance, initially set out at the time of its IPO in April 2021, the Board's updated framework for guidance confirms its short-term goals and sets out its expectations for the longer-term.

With respect to the longer-term, set against a backdrop of the substantial target market opportunity in UK Defined Contribution pensions of approximately £700bn in assets, the Company is pursuing a market share of approximately 2% over the next 5-10 years (equivalent to about 1m Invested Customers, assuming an average pension pot size of £20,000- £25,000). With an expectation of maintaining relative Revenue margin stability, this translates into a long-term annual Revenue opportunity of approximately £150m. The Company expects to achieve long-term EBITDA Margins of more than 50%, owing to the scalability of the technology platform.

In the short to medium term, the Company remains on track to achieve ongoing Adjusted EBITDA profitability by the end of 2023 and to be profitable for the full year 2024, by reducing the Cost per Invested Customer and delivering further automation through its scalable technology platform.

Year-to-date trading has been strong, driven by net flows from new and existing customers.

Financial Highlights

* PensionBee's Key Performance Indicators include alternative performance measures ('APMs') which are indicated with an asterisk. APMs are not defined by International financial Reporting Standards ('IFRS') and should be considered together with the Group's IFRS measurements of performance. PensionBee believes APMs assist in providing greater insight into the underlying performance of PensionBee and enhance comparability of information between reporting periods.

ppt - A ppt is a percentage point. A percentage point is the unit for the arithmetic difference of two percentages.

For definitions, see Managing our Performance section.

Enquiries:

Analyst Presentation

There will be a presentation for analysts at 8:30am via webcast. Please contact pensionbee@teneo.com if you would like to attend.

The analyst presentation will be available on the Company's website (with a video recording to follow) at:

 https://www.pensionbee.com/investor-relations/results-and-reports.

Investor Presentation

There will be a presentation for investors on Friday 17 March 2023 at 11.00am via webcast.

To register, please go to: https://www.equitydevelopment.co.uk/news-and-events/pensionbee-fypresentation-17march2023

About PensionBee

PensionBee is a leading online pension provider, making pension management easy for its customers while they save for a happy retirement.

PensionBee helps its customers combine their old pension pots, make flexible contributions, invest in line with their goals and values and make withdrawals from the age of 55 (increasing to 57 in 2028). PensionBee offers a range of investment plans, including fossil fuel free options, from some of the world's largest asset managers.

Operating in the £1 trillion market of Defined Contribution pension assets, PensionBee has grown rapidly through its direct-to-consumer marketing activities, creating a household brand name for the mass market.

The Company has over £3.0bn in Assets Under Administration and 183,000 Invested Customers as at 31 December 2022. PensionBee has consistently maintained a Customer Retention Rate in excess of 95% and an Excellent Trustpilot rating, reflecting its commitment to outstanding customer service.

Forward Looking Statements

Statements that are not historical facts, including statements about PensionBee's or management's beliefs and expectations, are forward-looking statements. The full year results contain forward-looking statements, which by their nature involve substantial risks and uncertainties as they relate to events and depend on circumstances which will occur in the future and actual results and developments may differ materially from those expressly stated or otherwise implied by these statements.

These forward-looking statements are statements regarding PensionBee's intentions, beliefs or current expectations concerning, among other things, its results of operations, financial condition, prospects, growth, strategies and the industry and markets within which it operates.

These forward-looking statements relate to the date of these full year results and PensionBee does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of the full year results.

Chief Executive Officer's Review

"While the macroeconomic environment remains uncertain, we focus on what we can control: building a pension company you can believe in, trust and be proud to be a part of."

2022 has been a challenging year for all. We have witnessed war in Europe and exceptionally harsh and volatile global markets, punctuated by rising interest rates, the energy crisis and stubborn inflation that have meaningfully raised the cost of living for UK consumers. In spite of these headwinds, or perhaps because of them, retirement planning has never been more important.

Throughout this year, we have continued to focus on what matters: serving our customers and supporting them through these challenges. The external environment has brought to the fore difficult decisions for UK consumers. How should I save for the future? Should I delay my retirement?

PensionBee has been there to offer its customers guidance and support, the type of service that all consumers deserve from their pension providers. We are proud to have maintained our Excellent Trustpilot score (4.6★) and to have achieved impressive app store ratings (4.7 App Store rating and 4.5 Google Play rating), reflecting the priority we place on customer communication and rapid response times, with contribution to customer service from every management level within the business (2021: Trustpilot score of 4.6★, 4.8 App Store rating and 4.7 Google Play rating).

As a company, we place great value and emphasis on doing what we said we would do. Trust has never been more important, especially as we have cemented our place as a household brand name. With brand awareness of more than 50% achieved¹, we continued growing our customer base, reaching a total of 183,000 Invested Customers² on our technology platform by the end of the year (2021: 25% brand awareness and 117,000 Invested Customers). We attracted these customers through a combination of data-led online performance marketing channels and our brand channels, including television and our sponsorship of the 'Brentford Bees', a Premier League football club.

As a result, amid steep declines in global equity and bond markets that have affected pension values across the country, our Assets under Administration surpassed the £3bn mark and our Revenue grew by 38% as compared to the previous year.³ Our high Customer Retention Rate of 97% and ongoing transfers and contributions from new and existing customers enabled us to record approximately £1bn of Gross Inflows.⁴ This, combined with the foundations of our scalable technology platform and disciplined cost control, enabled us to reach key profitability milestones of pre-marketing profitability across the fourth quarter of 2022 and post-marketing profitability in November 2022, in line with our expectations.⁵ We are primed to continue to deliver on this path, expecting to achieve ongoing full profitability on an Adjusted EBITDA basis by the end of 2023.²

This year was also notable for us with respect to environmental, social and governance ('ESG') considerations, as we conducted an exercise to assess ESG materiality from the perspective of our key stakeholders. We believe that all businesses must have a 'social licence' to operate, and as such we believe that meeting our ESG responsibilities to stakeholders will enable us to thrive over the long term. We were pleased to remain aligned with our stakeholders in our ambition to offer an inclusive and innovative product, one characterised by stewardship, purpose and excellent value, as well as to prioritise cyber security, diversity and inclusion and offering fulfilling careers for our team. With 91% of our workforce feeling aligned with our vision, mission and values⁶, we are meeting our goal of being an employer of choice with an inspiring vision.

As we look forward to 2023 we recognise that the world is in transition: efforts to move to a low carbon economy and one that is characterised by less inequality dominate our national conversation. We are proud to be a part of this change with our innovative product offering that empowers UK consumers to be 'pension confident' and to have control over their retirements. Our newly-launched Impact Plan will enable our customers to prepare for retirement while investing in companies that help further the achievement of the United Nations Sustainable Development Goals.⁷ We are also pleased to bring the 'regular withdrawals' feature to our customers, a product innovation we have developed over this year, in response to feedback from our customers over the age of 55.

While the macroeconomic environment remains uncertain, we focus on what we can control: building a pension company you can believe in, trust and be proud to be a part of. I am immensely proud of, and grateful to, the entire team for their dedication and hard work, for the spirit with which they approach our mission and vision and for upholding our values and culture. 

Outlook

We believe that the UK pensions market will continue to grow at pace, despite the challenging financial markets, supported by the regulatory framework and favourable policy changes, the acceleration of the UK's transition to digital technology and underlying trends in the employment market that increasingly demand a modern pension consolidation solution like ours. New opportunities and developments in technology are expected to continue to accelerate change in the pensions industry in ways that will ultimately benefit all consumers. The need to save for retirement through an efficient and scalable platform has never been greater, especially as we grapple with a cost of living crisis.

Our resilient business model, leading customer proposition, household brand status, committed and dynamic leadership team and robust capital position, will see us uniquely positioned to continue to grow at pace, navigating any challenges that the year ahead brings.

We look forward to 2023 being yet another exciting year in the PensionBee story.

Romi Savova

Chief Executive Officer

15 March 2023

Notes:

1.     Source: PensionBee brand tracker. Prompted brand awareness in January 2023 measured through a consumer survey asking 'Which of the following have you heard of?' with respect to UK financial services brands: Aviva 83%, Scottish Widows 77%, Standard Life 66%, Royal London 55%, PensionBee 52%, Hargreaves Lansdown 36%, Vanguard 32%, Fidelity 30%, Nutmeg 30%, AJ Bell 21%, Interactive Investor 9%. Compares to prompted brand awareness for 2021 of 25%, sourced from Boring Money, February 2022.

2.     See definitions in the Measuring our Performance section.

3.     38% change in Revenue calculated based on Revenue of £17.7m for the year to 31 December 2022 as compared to £12.8m for the year to 31 December 2021. See definitions in the Measuring our Performance section.

4.     Gross Inflows of £1,060m, Gross Outflows of £(197)m, Net Inflows of £863m and Market Growth and Other of £(424)m for the year to 31 December 2022 as set out in the Operating and Financial Review. See definitions in the Measuring our Performance section. 

5.     Pre-marketing profitability measured using Adjusted EBITDA before Marketing. Post-marketing profitability measured using Adjusted EBITDA. See definitions in the Measuring our Performance section.

6.     Source: PensionBee's annual Diversity, Inclusion, Equality & Support Survey, 2022. Compares to 96% of the workforce feeling aligned to PensionBee's mission, vision and values, as measured by PensionBee's Diversity, Inclusion and Engagement Survey, 2021.

7.     The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals, which are an urgent call for action by all countries - developed and developing - in a global partnership. They recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth - all while tackling climate change and working to preserve our oceans and forests. Source: sdgs.un.org/goals.

Operating and Financial Review¹

Continued Growth across all Key Metrics in 2022 and achievement of Adjusted EBITDA before Marketing Profitability in the Fourth Quarter of 2022²

Trading for the financial year 2022 has been strong and in line with expectations.

We have continued to deliver significant growth across all our major Key Performance Indicators. During 2022, the number of Invested Customers ('IC') increased by 56% to 183k and Assets under Administration ('AUA') increased by 17% to over £3.0bn driven by strong Net Flows of £863m.¹ Revenue increased by 38% to £17.7m with Annual Run Rate ('ARR') reaching £19.5m.³

Becoming a profitable business has been a key objective for PensionBee. On the path to achieving this objective, we are pleased to have delivered positive Adjusted EBITDA before Marketing of £0.2m in the fourth quarter of 2022 (fourth quarter of 2021: £(1.5)m), in line with our previously stated guidance and in spite of the backdrop of a challenging macroeconomic environment and volatile capital markets. Profit/(Loss) before Tax for 2022 was £(22.4)m (2021: £(25.0)m).

The Adjusted EBITDA before Marketing profitability milestone was achieved by virtue of our recurring and predictable Revenue, supported by our high Customer Retention Rate of 97%, and by the generation of operating leverage achieved through our scalable technology platform and careful cost control. It also demonstrates the strength of our business model, our ability to realise operating leverage throughout the business cycle, even during periods of high uncertainty and volatility in the capital markets, and the strength of our execution capability.

While profitability is a key objective for the business, with a vast market opportunity, we simultaneously continued to execute on our growth strategy, through investments in our brand and performance marketing channels. As such, Advertising and Marketing Expenses increased from £12.9m in 2021 to £16.6m in 2022.

Taking advantage of growing national awareness of pensions, our investment in brand building campaigns and initiatives saw us become a household name, achieving prompted brand awareness of more than 50%.⁵ We rolled out our 'Yellow Chair' and 'Believe in the Bee' campaigns nationally, across all channels. Furthermore, we continued to raise our profile through being the official pension partner sponsor of Brentford Football Club.

Customer acquisition was supported by our proprietary in-house Data Platform, which continued to deliver valuable insights across all of our core marketing channels, helping us to navigate decision-making in a challenging external market. Our agility enabled us to respond and adjust our spend across channels, re-focusing on the acquisition of more receptive customer cohorts. Our acquisition strategy included brand campaigns being launched predominantly in the first half of the year, with more lower-cost acquisition activities following later in the year, allowing for a reduction in the Cost per Invested Customer ('CPIC') by the end of 2022.¹

As a result of the marketing investment, we achieved strong customer growth with stable CPIC and grew our Invested Customer base by 56% to 183,000 by the end of 2022.

Cost Disciplined Acquisition coupled with High Retention Rates delivered Strong Asset Growth

We delivered a 17% year-on-year increase in AUA from £2,587m to £3,025m in 2022, highlighting the resilience of our AUA and underscoring our ability to grow, in spite of the challenging global macroeconomic environment.

We maintained Gross Inflows for the year in excess of £1bn (2021: £1bn) as a result of cost-disciplined new customer acquisition and a high sustained Customer Retention Rate of 97% (2021: 97%).

From the £863m of Net Flows generated across the year (2021: £955m), growth from new customers represented the vast majority, with Net Flows from New Customers of £685m (2021: £729m), reflecting the successful execution of cost-disciplined new customer acquisition and demonstrating our ability to optimise marketing across channels and return on investment. Total Net Flows were lower compared to last year, which was ultimately because of declining global markets (see below for more details). Over the period we acquired 66,000 new Revenue-generating Invested Customers (2021: 48,000).

Our existing customers have continued to grow their savings with us, with Net Flows from Existing Customers of £178m generated in 2022 (2021: £226m). Since inception, we have consistently enjoyed high Customer Retention Rates and AUA Retention Rates in excess of 95%, with this trend having remained stable in 2022. We saw existing customers consolidating additional pensions into their PensionBee online pension plans and customers contributing to their pensions, whilst maintaining relatively low levels of withdrawals, in line with historical levels. We are pleased to have observed underlying growth in Net Flows¹ from all annual customer cohorts across 2022.

However, unstable global markets did have an adverse effect on AUA, with Market Growth/(Contraction) and Other of £(424)m in 2022 (2021: £275m). As is customary in the pensions industry, our customers' pensions are invested predominantly in global equity capital markets, which were impacted by a number of macroeconomic factors including increasing inflation, rising interest rates and geopolitical tensions. As such, the decline in global market performance during the year had an impact on our asset base, similar to the experience of other companies in the sector.

Resilient Revenue Margin drove an Overwhelming Majority of Recurring Revenue

We translated strong year-on-year AUA growth of 17% over 2022 (2021: 91%) into 38% (2021: 103%) growth in Revenue, reaching £17.7m (2021: £12.8m), underpinned by the stable Contractual Revenue Margin. The Contractual Revenue Margin is the headline annual management fee paid by customers before applying discounts for incremental pension savings above £100,000. The Contractual Revenue Margin remained resilient at 0.69% (2021: 0.69%), as did the Realised Revenue Margin (the annual management fee after discounts) of 0.63% (2021: 0.64%).

As the vast majority of our Revenue is derived from annual management fees charged as a percentage of AUA, the high retention of Invested Customers and AUA makes the overwhelming majority of our Revenue recurring in nature. Therefore, the Annual Run Rate Revenue for December 2022 offers measurement of our progress and provides visibility and predictability with respect to future years' Revenue.

Our proprietary technology is modern, scalable and secure. The cloud-based and API-driven platform provides the foundations on which to continue to build dynamic and innovative products, while maintaining full control over the experience delivered to customers in a cost-efficient manner. The scalability of the technology platform is key in driving operating leverage through not only empowering more efficient marketing deployment, but also operational efficiencies in administration and intuitive self serving capabilities for our customers.

During 2022, we made further investments in our technology platform. Investments made in our Data Platform were instrumental in supporting decision-making around marketing budget allocation, helping us to remain agile as we have navigated the volatile external environment. We dedicated resources towards making ongoing efficiency improvements in consolidation activity and optimising our transfer processes. The systems' investments made over the past few years have supported the delivery of increased productivity for the PensionBee team and enhanced efficiency for our customers, enhancing our operating leverage.

Continued product innovation is central to our strategy and also supports the realisation of operating leverage over time. The PensionBee customer proposition has been enabled by investment in continuous innovation and automation, allowing easy onboarding of customers and intuitive lifetime self-service.

During 2022, continuous product innovations helped to increase our Invested Customer base and enable them to contribute more into their pensions. We officially launched the 'Easy Bank Transfer' feature, enhanced our 'Refer A Friend' program, and implemented the 'Stronger Nudge' journey for customers over 50, further tailoring our product to our customers' needs. To complement the ease of contributions, we worked on producing an easy-to-use tax relief calculator aimed at helping our customers make the most of their tax allowances in the run up to the end of the 2022/23 tax year.

Our product developments reduced friction in the customer journey and enabled our customers to self-serve more efficiently, without the need to contact us. For instance, we upgraded existing electronic transfer processes and further integrated with Altus Transfer Gateway, which led to improvements in internal processing and faster transfer times for some paper-based workplace pension schemes. Our investments in product and feature extension have not only empowered customers with more intuitive self-serving features but have also supported efficiency improvements and the generation of operating leverage over time.

As a result of the investment into the technology platform and the drive to improve automation, we have expanded specialist roles in technology, product and marketing. However, average headcount in customer service has remained stable as a function of the vast automation improvements and team optimisation. Overall headcount increased from approximately 155 average full-time employees in 2021 to approximately 185 in 2022, and the associated Employee Benefits Expense increased to £9.6m for 2022 (2021: £7.4m).

Other Operating Expenses increased to £8.2m (2021: £6.6m), reflecting costs to support increased headcount and new customer acquisition, and other fixed costs. Benefits from the investment in automation have positioned us well on our path to achieving Adjusted EBITDA profitability by the end of 2023.

Money Manager Costs increased to £2.8m in 2022 (2021: £2.3m), a lower rate than the increase in Revenue, due to the maintenance of competitive pricing with money managers.

Profitability Metrics

One of the key profitability metrics that we have measured is Adjusted EBITDA before Marketing, given the discretionary nature of the marketing spend. This measure includes Money Manager Costs, Technology Platform Costs and Other Operating Expenses but excludes Advertising and Marketing Expenses, Share-based Payment costs and Transactions Costs. We delivered positive Adjusted EBITDA before Marketing of £0.2m across the fourth quarter of 2022, with an improvement in Adjusted EBITDA before Marketing Margin from (28)% to (17)% in 2022.

We also made further progress towards Adjusted EBITDA profitability, as operating leverage was realised due to the scalability of the technology platform and the continued efficient deployment of marketing spend. Adjusted EBITDA Margin improved from (129)% in 2021 to (110)% in 2022. Adjusted EBITDA captures Advertising and Marketing Expenses but excludes the Share-based Payment costs and Listing Costs.

Other Costs

Profit/(Loss) before Tax narrowed to £(22.4)m for 2022 from £(25.0)m in 2021, reflecting our progress towards profitability and showcasing the operating leverage in our model, whilst we continue to grow.

The decrease in Share-based Payment costs for 2022 reflected the accelerated vesting and granting of options in 2021 as a result of the Company's public listing.

Listing Costs in 2022 primarily consisted of fees and expenses incurred in relation to our transfer to the Premium Segment of the Main Market of the London Stock Exchange, with the costs in 2021 relating to the preparation for our Initial Public Offering in April 2021.

Finance Costs decreased as PensionBee did not hold any debt across 2022. The 2021 fees were associated with the £10m Revolving Credit Facility ('RCF') that we entered into with National Westminster Bank Plc on 22 March 2021 and later cancelled in September 2021. Initially sought as part of a prudent liquidity management strategy, it was no longer deemed necessary due to the strong cash position and attractive future prospects. The RCF was never drawn, but a cancellation fee was incurred.

Taxation included enhanced tax credits in relation to routine Research and Development refunds. No deferred tax asset was recognised with respect to the carried forward losses.

Basic Earnings per Share ('EPS') was (9.97)p for 2022 (2021: (11.86)p), the improvement reflecting the progress made towards profitability.

Financial Position

The Group's balance sheet remains strong. At the end of 2022, the Cash and Cash Equivalents balance was £21.3m (2021: £43.5m). Robust cost management was deployed to ensure that favourable supplier terms were agreed with long term contracts being reviewed periodically. As of the end of 2022, the Group had no significant borrowings. Net cash and cash equivalents decreased by £22.2m in the 2022 financial year due to the planned deployment of investment in marketing, our technology platform and additional headcount, to generate future returns (2021: net increase of £36.8m, driven by the increase in funding as a result of the Company's listing in April 2021).

Regulatory Capital and Financial Resources

PensionBee Limited, a subsidiary of the Company, is authorised and regulated by the FCA and therefore adheres to capital requirements set by the FCA. As of December 2022, the capital resources stood at £20.5m (unaudited) as compared to a capital resource requirement of £1.2m (unaudited), resulting in coverage of 16.6x. We have maintained a healthy surplus over our regulatory capital requirement throughout the year and continue to manage our financial resources prudently.

Summary Financial Highlights*

Notes:

1.     See the Measuring our Performance section.

2.     As at 31 December 2022. Invested Customers ('IC') means those customers who have transferred pension assets or made contributions into one of PensionBee's investment plans. Assets under Administration ('AUA') is the total invested value of pension assets within PensionBee Invested Customers' pensions. It measures the new inflows less the outflows and records a change in the market value of the assets. AUA is a measurement of the growth of the business and is the primary driver of Revenue. Net Flows measures the cumulative inflow of PensionBee AUA from consolidation and contribution ('Gross Inflows'), less the outflows from withdrawals and transfers out ('Gross Outflows') over the relevant period.

3.     As at 31 December 2022. Revenue means the income generated from the asset base of PensionBee's customers, essentially annual management fees charged on the AUA, together with a minor revenue contribution from other services. Annual Run Rate Revenue is calculated using the Recurring Revenue for the month of December multiplied by 12.

4.     Cost per Invested Customer ('CPIC') means the cumulative advertising and marketing costs incurred since PensionBee commenced operations up until the relevant point in time divided by the cumulative number of Invested Customers at that point in time. This measure monitors cost discipline of customer acquisition. PensionBee's desired CPIC threshold is £200-£250. 

5.     Source: PensionBee brand tracker. Prompted brand awareness in January 2023 measured through a consumer survey asking 'Which of the following have you heard of?' with respect to UK financial services brands: Aviva 83%, Scottish Widows 77%, Standard Life 66%, Royal London 55%, PensionBee 52%, Hargreaves Lansdown 36%, Vanguard 32%, Fidelity 30%, Nutmeg 30%, AJ Bell 21%, Interactive Investor 9%. Compares to prompted brand awareness for 2021 of 25%, sourced from Boring Money, February 2022.

6.     Money Manager Costs are variable costs paid to PensionBee's money managers.

7.     Technology Platform Costs & Other Operating Expenses comprises Employee Benefits Expense (excluding Share-based Payment) and Other Operating Expenses.

Measuring our Performance

When looking at the overall performance of PensionBee, we use a range of key performance indicators ('KPI's) to monitor and assess our progress against our strategy.

Financial Performance Measures

* PensionBee's Key Performance Indicators include alternative performance measures ('APM's), which are indicated with an asterisk. APMs are not defined by International Financial Reporting Standards ('IFRS') and should be considered together with the Group's IFRS measurements of performance. PensionBee believes APMs assist in providing additional insight into the underlying performance of PensionBee and aid comparability of information between reporting periods.

Non-Financial Performance Measures

Notes:

A ppt is a percentage point. A percentage point is the unit for the arithmetic difference of two percentages.

Principal Risks and Uncertainties

Principal Risks

PensionBee has identified six types of top-level risks which could potentially have a material adverse impact on the Company's business or long-term performance, and if not appropriately mitigated they could result in unfavourable public perceptions of the Company's business prospects and significant reputational damage. These risks could arise from internal or external events, acts or omissions. The risk factors mentioned below do not purport to be exhaustive, as there may be additional risks that the Company has not yet identified or has deemed to be immaterial.

Regulatory Risk

PensionBee's business is subject to risks relating to changes in UK government policy and applicable regulations. Whilst we have historically been beneficiaries of favourable regulatory changes, including through the introduction of Automatic Enrolment and Pension Freedoms, any regulatory changes which are negative for PensionBee's business could have a material adverse effect on our prospects.

PensionBee's operations are subject to authorisation and supervision from the Financial Conduct Authority, and supervision from HMRC and the Information Commissioner's Office. PensionBee may fail, or be held to have failed, to comply with regulations and such regulations and approvals may change, making compliance more onerous and costly. The Financial Conduct Authority, or other regulators, could conclude that PensionBee has breached applicable regulations, which could result in a public reprimand, fines, customer redress or other regulatory sanctions. PensionBee must also comply with relevant regulatory capital and liquidity requirements.

PensionBee may be subject to complaints or claims from customers and third parties in the normal course of business. If a large number of complaints, or complaints resulting in substantial customer and third party losses, were upheld against PensionBee, it could have a material adverse effect on PensionBee's business and financial condition.

Information Security Risk

PensionBee faces various risks related to the confidentiality, availability and integrity of our IT systems.

PensionBee holds confidential and personal data, which is subject to strict data protection and privacy laws in the UK, including the UK GDPR. The loss or misuse of data could result in a material loss of business, financial losses, regulatory enforcement actions and significant harm to our reputation. If our information security processes, policies and procedures relating to personal data are not fully implemented and followed by employees, or if any of our third party service providers fail to manage data in a compliant manner, we could face financial sanctions and reputational damage.

Furthermore, our operations are susceptible to cybercrime and loss or theft of data. Failure to prevent such actions, or circumvention of our information security processes, policies and procedures could result in financial losses, business interruption and unauthorised access to personal data.

There is also a risk of inadequate or failed controls that are in place to ensure our technology architecture is fit for purpose, including the infrastructure required to support applications, networking, hardware and software, resulting in our inability to meet the standards required to deliver to internal and external user expectations.

Operational Risk

During the regular course of business, PensionBee may be exposed to adverse financial or reputational impact due to inadequate or failed internal processes, people performance or IT systems, or due to third-parties or external events. Key operational process risks are linked to our customer service, banking, finance, marketing and change implementation processes. Operational Risk also includes our risks in the areas of human resource management, risk management and internal governance.

PensionBee is dependent on third-party technology and financial services providers for the provision of investment management, banking and technology services. Any termination, interruption or reduced performance of the services provided by these third parties could negatively impact the provision of our services and have a material adverse effect on our reputation and profitability.

Our operational infrastructure and business continuity may be affected by other failures or interruption from events, some of which are beyond our control. Our systems and the systems of our third-party providers may be vulnerable to fire, flood and other natural disasters, power loss or telecommunications or data network failures, improper or negligent operation by employees or service providers, unauthorised physical or electronic access, or other causes. There is no guarantee that our preventative measures will protect us from all potential damage arising from any of the events described above.

Financial Risk

Market Risk

PensionBee's business may be adversely affected by negative sudden or prolonged fluctuations in global capital markets. We generate the vast majority of Revenue in the form of fees charged on a recurring basis calculated by reference to the value of our AUA. Our Revenue and profitability are therefore directly influenced by global capital markets. A general deterioration in the global economy and a resulting decline in capital markets or an increase in volatility may have a negative impact on the value of our customers' pensions and their overall confidence to make new contributions to their PensionBee pensions.

Credit Risk

PensionBee is dependent on third-party financial services providers for the provision of investment management and banking services. We are reliant upon these third parties for the safekeeping of our own and our customers' assets. A default by one of these third parties would have a material adverse effect on our reputation and financial position.

Strategic Risk

The pensions market is competitive and there is no guarantee that we will be able to continue to maintain the growth levels we have achieved to date, or that we will be able to maintain our financial performance either at historical or anticipated future levels. Our competitors include a variety of financial services firms and our market is characterised by ongoing technological progression, including of the underlying infrastructure and user experience. There is no guarantee that we will continue to outpace our competitors. In addition, the pension market remains cost-sensitive and competitors could materially undercut our fees, thereby generating pressure on our revenues. Any failure to maintain our competitive position could lead to a reduction in revenues and profitability as well as lower future growth.

We are dependent upon the experience, skills and knowledge of our Directors and senior managers to implement our strategy. The loss of a significant number of Directors, senior managers and/or other key employees, or the inability to recruit suitably experienced, qualified and trained staff as needed, may cause significant disruption to our business and the ability to achieve our strategic objectives.

Climate Risk

As climate change intensifies, dangerous weather events are becoming more frequent and more severe. More frequent and intense droughts, storms, heat waves, rising sea levels, melting glaciers and warming oceans can directly harm life and wreak havoc on people's livelihoods and communities. Climate risk has been added to our principal risks this year.

These shifts in the global climate have a potential to adversely affect the lives, livelihoods and health status of our employees, customers and other stakeholders, or to have broader implications on economic, social and cultural assets. Any of these changes could in turn have a material adverse effect on PensionBee's business and financial position.

Summary of Risks and Mitigations

Through the risk management process described above, we have taken the appropriate steps to reduce risk in accordance with our risk appetite. The summary of these mitigating factors is presented below. 

Viability Statement

In accordance with provision 31 of the UK Corporate Governance Code, the Board has assessed the viability of the Group for the four-year period to December 2026, considering this to be an appropriate period over which to assess the Group's strategy and its capital requirements, considering the investment needs of the business and the potential risks and uncertainties that could impact the Group's ability to meet its strategic objectives. The Board considers a four-year period to be an appropriate time frame because it would likely capture the length of a potential downside business cycle and provide sufficient time to identify and execute mitigating actions required to address the stress test scenarios as outlined below.

This assessment has been made giving consideration to the financial position, regulatory capital and liquidity requirements of the Group (as set out in the Operating and Financial Review within the Strategic Report), in the context of the Company's strategy, business model and medium-term business plan, together with an assessment of the principal risks and uncertainties (as set out in the Managing our Risks section of the Strategic Report). Such risks have been categorised into regulatory, information security, operational, financial, reputational, strategic and climate risks, in accordance with our risk management framework. 

PensionBee Limited is an FCA regulated entity and therefore is required to hold appropriate levels of own funds which are at all times in excess of its Liquid Capital Requirement and other capital requirements.

The Board-approved medium term plan assumes the business continues to grow Invested Customers and AUA through continued investment in its customer proposition, marketing, people and technology. It is assumed that there are no significant or prolonged market movements in underlying asset values from the time the plan was approved by the Board. 

The Board has also considered the potential impact of the following stress test scenarios, which together represent a severe and unlikely, but possible scenario. The stress test scenarios would impact the plan from 2023 onwards:

In the event that such modelled scenarios were to manifest, the Board would consider the reduction of discretionary marketing expenditure and the implementation of fixed cost savings as key management mitigating actions to be taken. The Board considers this approach to be reasonable in light of the Group's performance and positioning within the UK competitive landscape.  

The results have confirmed that the Group would be able to withstand the adverse financial impact of these scenarios occurring together over the four-year assessment period and that it would continue to be able to meet its liabilities and capital requirements. 

The Group's medium term plan was reviewed by the Board in December 2022 and subsequently approved in January 2023. The stress test scenarios and associated mitigating actions were reviewed in January 2023 and subsequently approved in March 2023. The Directors confirm that they have a reasonable expectation that the Group will be able to continue to operate and meet its capital requirements and liabilities as they fall due over the four-year period to December 2026.

The Strategic Report was approved by the Board on 15 March 2023 and signed on its behalf by

Romi Savova

Chief Executive Officer

15 March 2023

Statement of Directors' Responsibilities 

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law, they are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the UK in conformity with the requirements of the Companies Act 2006 and have elected to prepare the Parent Company Financial Statements in accordance with UK Accounting Standards, including FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland. Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of their profit or loss for that period.

 In preparing each of the Group and Parent Company Financial Statements, the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's operations and disclose with reasonable accuracy at any time the financial position of the Company and that enable them to ensure that its Financial Statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance report that complies with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

We confirm that to the best of our knowledge:

We consider that the Annual Report and Financial Statements 2022, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Approved by the Board of Directors on 15 March 2023 and signed on its behalf by:

Romi Savova
Chief Executive Officer
15 March 2023

Results for the Year

The notes form an integral part of these financial statements.

Approved by the Board on 15 March 2023 and signed on its behalf by:

Christoph J. Martin
Chief Financial Officer