Improving EDI ‘essential’ to well-run UK pension schemes

Diversity, equity, and inclusion - or DEI - is rapidly becoming a critical focus for those managing pension schemes. This month Pensions Age, announced DEI as its year-long special focus, aiming to highlight its growing importance in governance and member outcomes. The initiative has received praise, with industry leaders like Zoe Alexander of the Pensions and Lifetime Savings Association emphasizing the need to address DEI for both savers and industry professionals. Thie aim is to drive discussions, share best practices, and encourage progress in integrating DEI into the pensions sector. We’ll speak to a pensions expert and D&I specialist about what progress looks like in practice.

Central to this is The Pensions Regulator’s guidance on EDI, published in March 2023, designed to encourage trustee boards and sponsoring employers to integrate equality, diversity, and inclusion into their governance and decision-making. The guidance calls on trustees to embed DEI principles into every aspect of their work, from board recruitment and succession planning to how decisions are made and communicated.

One of the most pressing issues highlighted in the Pensions Age article is the lack of diversity on trustee boards. Research reveals that the typical trustee remains a white man over the age of 45, with women, younger individuals, and those from diverse backgrounds still underrepresented. As they point out, this lack of representation creates barriers to effective governance and decision-making, limiting the ability of boards to reflect the diversity of their membership.

They also highlight the role of sponsoring employers, who are often ahead of trustee boards in their DEI strategies. As they explain, employers have valuable experience and established policies that can support trustees as they navigate their own DEI journeys. Collaboration between employers and trustee boards is essential, as it allows boards to leverage existing expertise and align their governance practices with broader organizational diversity goals.

The article also emphasizes the importance of understanding the makeup of pension scheme membership. Boards must gather data to identify gaps in diversity among members and beneficiaries. This information is crucial for informed decision-making and ensures that trustees can address the needs of all stakeholders effectively. However, DEI isn’t just about demographics - it’s about diversity of thought. Boards can bridge gaps in representation by drawing on external advisers or creating advisory groups to provide fresh perspectives and challenge conventional thinking.

The article warns that boards failing to act on DEI could face significant risks. The Pensions Regulator has made it clear that trustee boards will be held accountable for meeting EDI expectations, and non-compliance could lead to reputational damage and increased scrutiny. As TPR EDI lead, Sandisiwe Dhlamini, puts it: ‘Embedding DEI into every aspect of governance is not just an ethical imperative – it’s a practical necessity for the future of the pensions industry.’

Pensions expert Christina Bowyer and D&I specialist Kieron O’Reilly have been taking that message to clients - both trustee boards and sponsoring employers - and earlier I had the opportunity to talk to both of them by video-link from the London office. First I asked Kieron if he would explain the role of the chair in all of this, which is key: 

Kieron O’Reilly: “Certainly. So, the role of the chair, that's very important one because that individual is going to be responsible for ensuring that the guidance TPR has given around EDI is worked upon. If we have a look at enhancing diversity of the board itself, a very purposeful challenge because the idea of this, if we go back to the benefits of it, is to enhance decision making and support the needs and requirements of the members of the pension. So they are going to be asking people to try and have different forms of diversity represented on the board. That's quite a challenge but it is one of the areas of focus, and I think those two big areas will be bringing EDI into what the board is. Essentially what they're trying to ensure is that EDI is considered in the decision making. So essentially, the board is going to have to be able to show how they've done their workings and show how EDI is part of it. So those two would be good examples.”

Joe Glavina: “I imagine that sponsoring employers will be familiar with the concept of EDI, Kieron, but less so with governing bodies and trustees. So is there a role for employers, HR teams, to reach out and help on this journey?”

Kieron O’Reilly: “There is a slight role, yes, because they’ve got plenty of experience but there's also a role for the governing body. They should reach out and get in touch with the sponsoring employer because there will already be plenty of good practice that they can work from. So it just makes things a lot easier if they go in and ask and share that knowledge and experience that’s been gained.”

Joe Glavina: “Christina if I could come to you. You’re already helping a number of clients with their EDI strategy around this. Who are you working with on that, and what’s the aim?”
 
Christina Bowyer: “So we're working with both trustee boards and employers. Often the trustees have employer representatives or employers in the trustee board meetings with them, and during the year we were working on training programmes for them to understand EDI so that both the trustee board understands it, but also their employer, the sponsoring employer of the scheme, understands what exactly is being said to the trustees and how they can help with that. As we said earlier, there are areas where the employers are ahead on the EDI programmes.”

Joe Glavina: “I’m aware that as part of its work in this area TPR is busy gathering data and conducting surveys to better understand the impact of EDI on pensions schemes. Is that an exercise that clients should also be doing for themselves, in your view?” 

Christina Bowyer: “I would say yes. You do need to understand the makeup of your own scheme so that you understand the diversity, or lack of diversity, of the pension scheme members and the beneficiaries who might gain benefits from the pension scheme. So you do need to do some data gathering and understanding of the different sections of membership that you have already, and those that you don't I guess, and there might be some parts of the diverse population that you don't really have in your scheme, but that doesn't mean to say that a board is not necessarily going to benefit from a wide diversity of thought and people making decisions.”

Christina Bowyer and Kieron O’Reilly talking to me earlier. If you’d like to read the Pensions Age article you can. It’s called ‘Pensions Age 2025 special focus: Why DEI?’ and we’ve included a link to it in the transcript of this programme for you.

- Link to Pensions Age article

- Link to EDI guidance