A net-zero-now investment strategy winning plaudits from Richard Curtis, former minister and consumer champion Ros Altmann now on the advisory board, and a suite of payroll-deductible savings wrappers that is a match for any provider. Fintech pension and savings provider Cushon’s CEO and founder Ben Pollard has not let the grass grow beneath his feet since launching his savings platform, then called Smarterly, back in 2017.
Like most new businesses, it started with a single idea. For Pollard, it was the belief that there had to be a better way of setting up an Isa. That germ of an idea has evolved into a £280m master trust and savings provider that is challenging existing players with both tech and ideological innovations.
“Cushon started with an indignant actuary feeling put out at the quality of information that I was being expected to make a decision based on when I was trying to set up an Isa.
“I went to Hargreaves and Fidelity and the other retail investment platform type providers and was aghast at the basis on which I was being expected to make a decision.
“The way I see it is you need to understand how much risk you’re comfortable taking, seek to diversify as much as possible, and seek to minimise the amount of charges that you’re paying. And that’s pretty much all there is to it.
“So this whole concept of story-based investing, where you spend hours reading up in the FT on what Neil Woodford thinks Brexit might mean for this, that or the other, was a bit of an anathema to me. I thought ‘it’s hard enough for me, so it’s going to be hard for other people to save, so let’s try and package this stuff up in a way that makes it accessible and easy to use for normal people.”
In a sense, Cushon seeks to bring an institutional approach to saving, says Pollard. “It is that institutional approach, packaged up in really sexy, beautiful technology to make it accessible. But sitting under the hood, it’s that very dry analytical, data driven mindset,” he says.
Pollard accepts the Hargreaves approach does engage investors in the whole concept of putting money into companies.
“The enthusiastic FT-reading armchair investor enjoys all this stuff, right? And that’s great. But that’s not how the institutional investment mindset works. So we set out to make that accessible to normal people. “We cover a full range of funds, pretty much the same ranges you would get from Hargreaves or Fidelity or the other platforms. And for each fund we show you what we think the most likely return is fund. All this complicated analysis is translated into Moneysupermarket-type language that you can compare to the interest rate you might get on cash, or other assets. This means we don’t need to sort of educate people on the difference between equities and bonds, or the difference between gilts and corporates.”
Cushon’s initial incarnation was Smarterly, which started off as a retail Isa and savings platform proposition.
“It fairly quickly became apparent that that’s an expensive distribution model. You could do a Nutmeg and raise loads of money, and that goes to marketing. It’s a perfectly sensible business model, but it’s expensive. At the time I was doing some work with Unum and we ended up teaming up. Unum provided some seed capital and we pursued this workplace-oriented distribution strategy together,” says Pollard. The start-up was then joined by benefits tech pioneer Phil Hollingdale, who “turbo- charged a more aggressive strategy towards getting us to where we are today. If you are feeling acquisitive, which we are, we’ve got access to the resources that we need to fulfil that,” says Pollard.
Smarterly got a big boost in assets with the acquisition of the Salvus Master Trust in April 2020. The deal was the first acquisition of an authorised master trust following The Pension Regulator’s master trust authorisation regime. Salvus Master Trust had over 68,000 active and deferred members and £208m of assets at 31.12.19. A year later and now rebranded as the Cushon Master Trust, the provider had DC assets of £280m across 3,280 employers.
It received bulk transfers in of £8.6m in 2020 and Pollard says the provider’s unique approach to ESG and climate change is starting to give it cut through, landing it on provider beauty parade shortlists.
While big incumbents have been making net zero by 2050, or in some cases 2045, commitments, at the start of the year Cushon crashed into the debate with its ‘net zero now’ pledge, using carbon offsetting to offset what it calculates are 23 tonnes a year of CO2 generated by the typical UK pension saver’s portfolio. Cushon is paying for the offsets out of its own pocket, although it has not revealed the cost per tonne of CO2 it is paying.
Competitors may perceive the move as opportunistic, from a provider that can afford to pay to offset the emissions of what is a fraction of the assets of established players in return for a significant marketing advantage. But Cushon points out its strategy is actually taking carbon out of the atmosphere now, while other providers’ portfolios are putting carbon in.
Pollard describes three pillars to the Cushon approach. “First is just making everything simpler and easier and slicker, like what Deliveroo has done for takeaways. You’ve been able to order takeaway for donkey’s years. They’ve just made it easier and simpler.
“The second part, which is where our recently-announced partnership with ESG voting service Tumelo comes in is about creating that connection between people and the issues they care about. The net zero now investment policy is also part of that. “The third strand is personalisation – enabling people to understand in simple terms that if I choose this strategy rather than that strategy, then my most likely outcome is this, my good case increased to that, and my bad case also changes. This empowers people to make better informed decisions for themselves around risk and return. When you apply that to the default fund pensions world, it’s incredibly powerful. “If you’ve got a group of a hundred thousand people and you’re running them through a default strategy, which is to some extent a one size fits all approach, if you can empower each one of those individual people to make a better informed decision for themselves you can make sure they end up in a strategy that is a better fit for them. If you apply all those little micro benefits for each individual person across the country as a whole, the value creation is enormous.”
So does Pollard see a matrix approach to defaults where interaction with the scheme member sources information that can lead them to a portfolio that balances away from the core default?
“Yes. We have a standard default. But having a really simple, easy to use mobile app and creating a connection between people and the issues they care about means we get more engagement. And then off the back of that engagement, you can get people to think ‘is this the best strategy for me?’ Or ‘I’m going to change my target age to 75 or 80’. And you do that all in a matter of a few taps.”
Pollard says it is still early days in terms of numbers of people going through these sort of decisions, but he says app download rates have been around 60 per cent of members so far, a very high rate for pensions engagement.
“That talks to the quality of comms in the build-up to these launches. Another embarrassingly simple innovation is every time you get some money paid into your to your pension we send you an email or a notification to tell you that that’s happened and get you to install the app. Through that process, as we’ve had a few months of contributions paid in that 60 per cent has notched up to around 85 per cent from the data that we’ve seen so far,” he says.
Cushon’s quantification of the climate impact of pension investments – or any other investments for that matter – is breathtakingly simple, yet devastating for anyone concerned about their impact on the planet. The idea that a £90,000 pension could have a carbon footprint of 23 tonnes, almost four times the circa 5.9 tonnes created in the UK by the average citizen, is a hammer blow to anyone looking to make lifestyle tweaks to reduce their carbon impact. Simple maths can lead to some devastating comparisons and mind-boggling dilemmas. A wealthier investor with a healthy but not remarkable £500,000 pension pot invested in a non-ESG strategy would be responsible for emissions equivalent to around 120 return flights to New York a year. If that saver is someone who actually does pay to offset their flights, then why wouldn’t they want to go for a net zero now pension?
Yet carbon offsetting is seen as controversial in some quarters, if it is used as an excuse to carry on polluting.
Pollard says: “You also have to do all what you can to avoid the emissions in the first place before you resort to offsetting. And then the decision you’re left with is, is should I offset or should I not offset? And then you look at what offsetting actually means, and it means providing financial support to various types of projects that no reasonable person could argue are not sensible and useful. We are restless in our desire to drive out as much CO2 from the portfolio at source and avoid avoidance as possible. And given that, do we think finding offsets is sensible? Absolutely. Every day we’re not driving CO2 out of our coal and that offsetting is coming out of Cushon’s own pocket.
“Capital markets and venture capital can make a huge contribution to achieving the kind of step changes we need in the way that we live our lives. Tesla is an example I often use. How do you make a step change from fossil fuel based cars to electric cars? Does it come incrementally through companies like Ford and VW and so on, incrementally moving away from fossil fuels into electric? Well, maybe in theory, but it didn’t happen. How it actually happening? What’s been the big catalyst has been Tesla. And they’re now worth more than the next seven car companies all combined. And how is that happened? It’s been through a large amount of venture capital.”
While Cushon hasn’t published what it is paying for its offsetting programme, Legal & General estimated offsetting an £89,000 pension would cost around £100, making a severe dent in the profitability of a customer with that sort of pot.
Given the charge cap and the price pressure on workplace pension scheme, it poses the question whether, as is the case with airlines, pension providers should offer customers the facility to pay themselves to offset their portfolio’s emissions.
Pollard says: “That would make a lot of sense. We have thought about kind of stimulating that as a as a question for the industry to ask itself. We’re all making commitments and promises around achieving that zero by some sort of day in the future. But what we are actually doing right now and what’s the mechanism that is in place to align our interests, either us as consumers or us as companies in the industry with delivering that sort of outcome. Attaching a cost to carbon emissions creates the right incentive to do the right thing.”