A workplace pension provider founded by two cousins has secured £500,000 in funding as it sets out to overhaul a market where the vast majority of employers say they are dissatisfied with their existing arrangements.
Compound, which targets growing businesses with a digitally native pension platform, closed the round with participation from Fuel Ventures and Paul Rippon, co-founder of the digital bank Monzo, who joins as a special adviser.
The timing looks shrewd. Workplace pension contributions across Britain are forecast to reach £480 billion by 2033, yet the sector remains dogged by outdated technology and disengaged savers. Some £50 billion in pension pots have already been lost track of entirely, whilst opt-out rates nationally sit at around ten per cent, climbing to fifteen per cent among millennials and seventeen per cent for Generation Z.
Auto-enrolment has succeeded in bringing millions of workers into pension saving since its introduction, but critics argue that poor user experience and impenetrable jargon mean many employees fail to grasp the tax advantages and long-term growth on offer. Research suggests that ninety-four per cent of companies encounter problems with their pension provider, a statistic that Compound’s founders believe represents a significant commercial opening.
The company, founded by Dan and Richard Klin, has built a platform that integrates directly with accounting and payroll software to reduce the administrative burden on employers. Alongside the business-facing product, Compound offers employees a mobile application with tools to find and consolidate old pension pots, a feature designed to tackle the lost pensions problem head-on.
Early results appear encouraging. Compound reports an employee opt-out rate of just 1.6 per cent, comfortably below the national average and a figure its founders attribute to removing friction from the process.
Richard Klin said the company was built to address what he describes as a fundamentally broken system. He argues that most people who opt out of workplace pensions are not rejecting the concept of saving but rather walking away from platforms they find confusing and untrustworthy.
Dan Klin, meanwhile, is keen to challenge perceptions of pensions as dull. He positions them as among the most powerful wealth-building tools available to ordinary workers, provided the administration is simplified and the engagement improved.
Mark Pearson, managing partner of Fuel Ventures, pointed to the scale of the problem that incumbents such as NEST have struggled to resolve, describing Compound’s product-led approach and sector expertise as well suited to disrupting the space.
Whether Compound can translate a promising pilot into meaningful market share remains to be seen. The workplace pension sector is dominated by large, entrenched players with significant distribution advantages. But with financial anxiety running high across the country and a generation of younger workers demonstrably disengaged from retirement saving, the appetite for a credible challenger has arguably never been greater.
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Monzo co-founder backs pension start-up Compound in £500,000 raise to shake up workplace savings