A workplace pension provider founded by two cousins has secured £500,000 in funding to reform a market where the vast majority of employers say they are unhappy with their existing arrangements.
Compound, which targets growing businesses with a digitally native retirement platform, closed the round with participation from Fuel Ventures and Paul Rippon, co-founder of digital bank Monzo, joining as a special advisor.
The timing looks smart. Workplace pension contributions across the UK are forecast to reach £480 billion by 2033, but the sector remains plagued by outdated technology and unmotivated savers. Around £50bn of pension funds have already been completely lost track of, while opt-out rates nationally are around ten percent, rising to fifteen percent among Millennials and seventeen percent among Generation Z.
Since its introduction, automatic enrollment has succeeded in including millions of employees in retirement savings. But critics argue that the poor user experience and incomprehensible jargon mean many workers don’t understand the tax benefits and long-term growth on offer. Research suggests that 94 percent of companies are experiencing problems with their pension provider, a statistic that Compound’s founders believe represents a significant opening for business.
Founded by Dan and Richard Klin, the company has developed a platform that integrates directly with accounting and payroll software to reduce administrative burdens for employers. In addition to the business-focused product, Compound offers its employees a mobile application with tools to locate and consolidate old pension benefits, a feature intended to directly address the problem of lost pensions.
Initial results seem encouraging. Compound reports an employee opt-out rate of just 1.6 percent, which is well below the national average and a number that the founders attribute to eliminating friction in the process.
Richard Klin said the company was founded to fix what he described as a fundamentally broken system. He argues that most people who opt out of corporate pension plans are not rejecting the concept of saving, but rather turning away from platforms they find confusing and untrustworthy.
Dan Klin, meanwhile, aims to challenge the perception of pensions as boring. He ranks them among the most powerful wealth creation tools available to ordinary workers, provided administration is simplified and engagement is improved.
Mark Pearson, managing partner of Fuel Ventures, noted the scale of the problem that incumbents like NEST are struggling to solve, and described Compound’s product-led approach and industry expertise as well-suited to disrupting the market.
Whether Compound can translate a promising pilot into significant market share remains to be seen. The corporate pension sector is dominated by large, established players with significant distributional advantages. But with financial anxiety rife across the country and a generation of younger workers who are demonstrably wary of retirement savings, the appetite for a credible challenger has arguably never been greater.
