Your money 'compounds' in a pension by generating money from investments on an ever-expanding basis. For example, your pension increases one year from investment,  then this sum is larger to invest, so the following year your pension increases even more from investment, which is an even larger sum to invest next year, which creates even larger returns and so on over the years. 

Therefore, the younger and sooner you start saving and investing, the more you're likely to have when you retire.