The Pensions Regulator (TPR) has set out a far-reaching equality, diversity and inclusion (ED&I) action plan aimed at improving diversity and inclusion on trustee boards.
The plan highlights the regulator’s ambition to build a workplace pension system that works for all. It has three aims.
The first is to be a fair, diverse and inclusive employer. On this point, Charles Counsell, TPR’s chief executive, said: “We must become more diverse and create the right environment for our people to thrive and be their best selves.”
Two, build a collective understanding of why pension inequalities occur and within its regulatory remit, work in partnership with others seeking to reduce them.
On this point, Counsel added: “Recognising the need to lead from the front in effecting change in the pensions landscape we also want to go beyond our public sector equality duty to demonstrate the equality we want to see in the industry.” Three, to promote high standards of equality, diversity and inclusion among the TPR’s regulated community.
On this point, Counsell said: “We will work with and influence the governing bodies that manage workplace schemes, provid- ing positive support and encouragement to help them become more diverse and inclusive in their decision-making.”
Diversity decision-making
Diversity is an area TPR has focused on following the release of its corporate strategy in the spring, which stated: “Improving diversity and inclusion on trustee boards is essential to effective decision making so that all savers get good value for money.”
This was an essential building block Counsell said: “This strategy set out the framework we have used to build our action plan for the period 2021 to 2025, as well as providing a foundation for our longer-term ambitions to drive change within our organisation, those we regulate and the wider financial sector.”
Janie Turner, co-chair of the Association of Member Nominated Trustees (AMNT), was pleased with TPR’s plan. “AMNT warmly welcomes the ED&I action plan, as we believe that diversity and inclusion amongst trustees is vital to ensuring good corporate governance of pension funds,” she said.
Turner added that she was ‘delighted’ that TPR is making it ‘absolutely clear’ that diversity on trustee boards is a vital issue. “Trustee boards that never previously saw this as relevant are being told not only that it is relevant, but that they are going to have to act. They cannot sit on the fence,” she added.
But Turner added that to make this work there needs to be commitment from the scheme sponsor. “We believe that success for a trustee board is going to involve active engagement with the scheme sponsor, not only in relation to the appointment of employer-nominated trustees but also to enable the scheme to have a more diverse pool from which to attract member nominated trustees,” she said.
No data
Putting diversity on trustee boards in perspective, PwC research found that only 24% of trustees are women and little research exists on the proportion of trustees from ethnic minority backgrounds.
In a survey conducted by TPR, only 10% of defined benefit schemes and 14% of defined contribution schemes formally obtained and recorded diversity data in relation to trustees.
The reasons for not collecting the data were that schemes had not thought about it or did not believe there was a need to do so. Putting into perspective the need for TPR’s action plan.
Highlighting another challenge, Turner said: “We hope that TPR recognises that trustee boards are to a significant degree dependent on the employer’s own success at achieving diversity among their workforce. If trustees are recruited from among the scheme members in a company’s workforce, and that workforce is not diverse, then it will be difficult to improve the situation on the trustee board unless the employer itself improves diversity within the workforce.”
In those cases, Turner said it will be necessary for trustee boards to engage with employers and encourage them to take action themselves. “There is an inextricable link between trustee action and success and employer action and success,” she said.
Dhrupto Shah, partner of PwC’s pensions employer covenant practice, who has been involved in the Industry Working Group assisting TPR with the ED&I strategy, made a similar point about challenges ahead.
“It [the ED&I Action Plan] will only make a difference if trustee boards are willing to commit to the challenges that come with increasing diversity,” he said.
Turner also said AMNT has been in discussions with those working on the TPR initiative. “And we will be happy to actively assist in taking this important initiative forward,” she said.
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