Should you invest in PensionBee since it appears to be profitable?

By combining retirement funds, PensionBee has established a lucrative market for itself

Next year, its growth trajectory will hit a turning point.

With the UK pensions industry undergoing a significant transformation over the past ten years, UK fintech PensionBee (LSE: PBEE) has successfully carved out a niche for itself and become the most renowned pension consolidator in the country.

Assets in defined-contribution (DC) plans have skyrocketed since the Auto Enrollment scheme was introduced in 2012, and the pensions sector has had to quickly adjust to this new standard. Workplace plans and individual or personal wrappers make up the two primary segments of the DC pension market. The market for self-invested personal pensions (SIPPs) and the consolidation of traditional workplace plans dominate the latter. With a market value of about 600 billion, it is expanding.

There is a much larger and more intricate workplace-scheme segment. With the intention of combining pots into mega funds worth more than £25 billion, the government is pushing through regulations to consolidate this market. Hundreds of schemes still exist, some with as few as 100 members, despite the market's notable consolidation over the previous ten years. This can increase costs and complexity.

This is where PensionBee is useful.

One of the most effective pension reforms in the world is generally acknowledged to be auto-enrollment. According to the current regulations, if an employee is a resident of the United Kingdom, works there, is older than 22, and makes more than £10,000, their employer is required to enrolll them in a pension plan. The minimum contribution is 3% from the employer, 5% from employees, and 8% of salary.

Employers have the option of using either a trust-based scheme or a contract-based approach. In a contract-based scheme, the pension providertypically an insurance company or investment platformand the scheme member (the company) enter into individual contracts. By using a trust scheme, the business enters into a partnership with a major pension master trust, like the People's Pension or Nest.

Auto-enrollment has significantly lessened the workload for employers in establishing employee pensions. Because they are automatically enrolled in the plan, as the name implies, and because contributions increase in tandem with wage growth, it also aids employees in saving for the future. However, people change jobs frequently throughout their careers, and because the industry is so dispersed, there's no assurance that your next employer will be able to provide access to the same program as you had before.

PensionBee's method for combining retirement funds.

Although PensionBee primarily markets itself as a platform for pension consolidation, it also offers private pension plans, including ones for independent contractors. Instead of managing the underlying investments, it accepts a platform fee and collaborates with major institutions like BlackRock, State Street, and HSBC to offer a variety of inexpensive funds.

The true advantage of PensionBee is its technology platform. It can be expensive and time-consuming to transfer or combine pensions. While more complicated transactions may take longer, PensionBee strives to finish electronic transfers in two weeks. Customers have responded favorably to the business's emphasis on technology, marketing, and simplicity. It calculates that for every £1 it spends on marketing, it receives about £100 in net asset inflows. It has a 95% customer retention rate and one of the highest brand-awareness scores among pension brands, at 57%.

The company had just reported 5.8 billion in assets under management when I last covered it in early 2022. The amount has increased to 8.6 billion in assets under administration across 327,000 invested clients, according to its most recent half-year results.

The company operates in markets that represent over £30 trillion in retirement assets, with exposure in both the US and the UK. The US market is still very small today, with less than £5 million in assets under management. Nonetheless, the company is in negotiations with over 100 intermediaries, and this business line has the potential to generate £1 billion in recurring annual inflows over the medium term. Since it has already made significant investments in the necessary technology, this expansion ought to be reasonably priced. As a result, marketing and a few technological advancements now account for the majority of its daily expenditures. PensionBee ought to have rapid and effective scaling capabilities.

PensionBee will soon turn a profit.

PensionBee's pence share price.

The company's group adjusted Ebitda for the first half of its 2026 fiscal year was -1.1 million. Adjusted Ebitda from the UK market alone was £1.5 million in the first half and £7.5 million over the previous 12 months.

Peel Hunt analysts have estimated that the company will report adjusted Ebitda of 0.5 million for the entire year in all markets. Analysts predict that PensionBee will reach management's 20 percent adjusted Ebitda margin by 2029 and attain sustainable profitability starting in 2027.

PensionBee continues to operate on a small scale in a large market with competitors that are much larger and have greater financial resources. The opportunity should not be overlooked, though. Peel Hunt predicts that the company will report adjusted Ebitda of 1.5 million by 2027 and then 8.08 million by 2028 as it finally reaches a growth inflexion point. Berenberg projects that as assets under management increase to almost 13 billion, sales will increase from 43 million in 2025 to 83 million in 2028. The numbers from Canaccord Genuity are comparable.

By 2028, the company could have a 34.5 percent return on invested capital if these goals are met. This figure demonstrates how profitable PensionBee could be at scale. Its fortunes could change in the coming years.