Diversity and inclusion as a major issue for the pensions sector is in the news again. Pensions Age is dedicating its entire 2025 coverage to this important topic. Their focus highlights how improving diversity in trustee boards and embedding inclusive practices can enhance governance, decision-making, and outcomes. We’ll speak to a pensions expert who is helping clients to achieve that.
A key theme of the article is just how slow progress has been. They quote the TPR’s Trustee Diversity & Inclusion Survey, published last spring, which shows that pension scheme boards are lacking diversity with the ‘typical trustee’ still being a white man who is over 45. It found that just 24% of trustees are women, compared with 52% of the wider population. Meanwhile, 9% of trustees were under the age of 45, compared to 44% of the wider population. As Bruna Bauer from Material Impact puts it: ‘Most pension funds only started considering DEI in the early 2020s’ and progress remains inconsistent across the industry.
This increased focus on DEI has been driven by a number of factors. As Scottish Widows managing director for retirement, Emma Watkins, points out ‘Sponsors are driving change because they are often more advanced in their DEI thinking than trustee boards.’ But the drive is also bottom up. On that point she says: ‘With employees increasingly wanting to work with companies who have robust DEI policies; the evidence being it builds trust and engagement. Trustees are also responding to guidance from The Pensions Regulator in March 2023, where they now have support materials to articulate what best DEI practice looks like.’
Aon partner, Susan Hoare, highlights other findings from TPR’s trustee survey. She flags how there has been industry recognition of the importance of inclusive and diverse boards, with 78% of respondents saying they felt a diverse trustee board was important. There was also broad consensus that diverse and inclusive pension boards are important for good decision-making (84%), good governance (83%) and good member outcomes (85%). She says: ‘The reason why TPR has dedicated attention to this subject is because “high standards of diversity and inclusion are instrumental to good decision making and ensuring pension savers get good retirement outcomes”. TPR equality, diversity, and inclusion lead, Sandisiwe Dhlamini, confirms that’s the case. She says: ‘That’s why we are working to raise standards of EDI in pensions schemes and urge trustees to follow our EDI guidance and take action to ensure their scheme meets our expectations.”
Sandisiwe made the same point last year in a panel session which was organised by our pensions team alongside our D&I consultancy Brook Graham. It was featured at the time in an article for Professional Pensions called ‘EDI - a call to action from the regulator’ which carried the central message that everyone should read TPR's guidance and take actionable steps based on it.
Pensions expert Christina Bowyer was on that panel alongside Sandisiwe and Brook Graham’s D&I specialist Kieron O’Reilly. Earlier, Christina joined me by video-link to discuss progress in this area. First question: where exactly are governing bodies and sponsoring employers on this journey?
Christina Bowyer: “So, I think sponsoring employers, as employers, have been thinking about EDI for quite some time and are probably further down the road on this but I would say trustee boards are just at the beginning of their journey on EDI. The guidance from the regulator came out in March 2023 but actually most schemes that we're working with are starting to think about this and put it on their business plans and their agendas.”
Joe Glavina: “The Pensions Age article echoes what TPR has been saying consistently ever since they published their guidance which you’ve described as ‘a call to action’. What do you mean by that?”
Christina Bowyer: “It’s a call to action because The Pensions Regulator really wants trustee boards, and the sponsoring employers behind them, to ensure that members are getting the best outcomes they can from the best decision making that they can provide and that includes thinking about the diversity of the board and the way in which the board is going to be made up in the future. So part of the guidance is pushing the chair of each trustee board to ensure that they include equality, diversity, and inclusion in the way in which they make decisions, and also review the way in which they make decisions to ensure that that is included. The chair is also being pushed to think about succession planning for both themselves and for member nominated trustees and appointed trustees.”
Joe Glavina: “The regulator has been gathering EDI evidence through its trustee survey but and so on, but does TPR expect trustee boards and sponsoring employers to conduct surveys and gather evidence on themselves?”
Christina Bowyer: “I would say the regulator expects trustee boards and employers to consider the way in which their board works and whether it's effective and whether the decision makers making is effective. They should also know the pension scheme they have and know the membership and the way it's made up. That doesn't mean to say that they only concentrate on that membership in terms of their EDI, but it does mean to say that they should have at least a knowledge of the membership that they've got, and that includes beneficiaries as well as members, by which I mean the people who benefit from pension arrangements perhaps once the member has died.”
Joe Glavina: “Of course, virtually every employer out there, certainly our clients, will already have an EDI policy of some sort. Is that a good starting point?”
Christina Bowyer: “I'm sure it's a good starting point to start thinking about well what does the employer already say about EDI? Let's think about the pool of people that we have who are the workforce and therefore the members of the pension arrangement and let's use it as a starting point. But it isn't the only thing that we need to consider because pension scheme considerations will be slightly different to company considerations and by that I mean things like when you're making a decision as a trustee, you might have a discretion to use in order to pay a benefit to a particular person, and when you're using that discretion you really need to think about what are the relevant considerations and one of those will be have I brought an appropriate thought process to this decision that I'm making, including, am I thinking about equality, diversity and inclusion here?”
Joe Glavina: “What is your final message to viewers watching this, Christina?”
Christina Bowyer: “I would say everyone is at the start of the journey in terms of the pension schemes that we're looking at, and pretty much everyone in the industry. So, start your journey now and start thinking about the guidance from The Pensions Regulator because that's what they expect and that is their call to action. Start looking at the guidance and then start thinking about how it applies to your pension arrangements.”
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: ‘Pensions Age 2025 special focus: Why DEI?’
