Improving EDI essential to well-run pension schemes, warns UK’s regulator

The Pensions Regulator, TPR, has issued a call to action to trustee boards and sponsoring employers to translate TPR's new equality, diversity, and inclusion guidance into actionable steps. At a recent panel discussion hosted by Pinsent Masons, TPR EDI lead Sandisiwe Dhlamini advised everyone to read TPR's guidance, get trained up, and take actionable steps based on it.

The panel session was chaired by pensions expert Christina Bowyer supported by EDI specialist Kieron O’Reilly and it was featured last month in Professional Pensions – Christina is in picture. The panel explored how a well-managed approach to ED&I can enhance trustee board decision-making and member outcomes.

In essence, the regulator wants to encourage compliance by equipping pension scheme chairs and trustees with the skills they need to make inclusive decisions, with an eye on succession planning,  for chairs and trustees, including the appointment of new member nominated, employer nominated and independent trustees. Sandi Dhlamini explained the importance of having a diverse trustee board and its link to the value for money framework. The framework stresses the significance of promoting better communication and engagement with members to ensure that they make the best decisions for themselves. She said that this communication can only be effective if trustee boards understand the needs of their members, which can be achieved through having diverse trustee boards.

Christina and Kieron have been taking that message to clients - 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.”

Joe Glavina: “Kieron if I can back to you. EDI is certainly not an easy concept and translating it into practical steps involving changes of personnel is quite an ask. Are you seeing any resistance to this from any of your clients?” 


Kieron O’Reilly: “There is some resistance but the reality is to recruit new board members is not easy. Also, the diversity that's available isn't wide. So I think that's the challenge that people tend to feel, that they’re being asked to do something they can't. The reality is, when you read the guidelines, it's about understanding diversity that surrounds you within the scheme. So I think diversity of thought does apply a very important aspect to the consideration here. So the challenge is we can't bring the diversity in, but you can certainly have good consideration of where you would go for advice for the diversity and range of experiences that doesn't necessarily sit around the board table.”

Joe Glavina: “If you had one key message for viewers watching this what would it be?” 

Kieron O’Reilly: “This is about everybody. Diversity is about everyone. So when the board is having a look at what they're doing, it's about them as much as others and they should recognise the skills, the strength, the experience they already have, and how they can add to it by using these guidelines.”

Joe Glavina: “Christina if I can come back to you. This is, of course, all about creating more diversity and it’s clear there’s a long way to go but to get a picture of how the land lies right now how diverse are the boards of governing bodies and sponsoring employers? What's the typical makeup?” 

Christina Bowyer: “Yes, so I think some years ago, I would say, most boards were made up of middle-aged men who were white, I would say, but that's changed quite considerably. There are a number of different diverse populations around a trustee board, but it's nowhere near as diverse as The Pensions Regulator would like it to be and we recognise that you can't have every single diversity around a trustee board. It's not possible even with a large board of say, you know, nine or twelve. You have to understand the people who around the board table, what you're lacking, where your gaps are in terms of diversity, and where you can try and fill those gaps by potentially using diverse boards of advisers for instance.”

Joe Glavina: “The General Code has recently been published and TPR’s guidance has been out for more than a year. It  seems pretty clear what TPR wants to see happen but, as I understand it, the regulator has limited powers. So what if trustee boards and employers simply ignore the call to action, or they do very little?”

Christina Bowyer: “I think the thing is with The Pensions Regulator there are many, many different things that trustee boards and sponsoring employers have to think about under that umbrella of the larger General Code, internal controls policies and guidance. EDI might be  lower down the list for many schemes but, actually, if The Pensions Regulator starts to look at the scheme for other purposes, if they haven't complied with other issues, then they will pick apart what have you done about EDI, and if you haven't done anything as a sponsoring employer or a governing body or a trustee board, then you are going to be answerable to The Pensions Regulator. They do have a certain amount of teeth and they will make sure that you understand that you have not complied with that guidance. Now if that gets out to the membership that can be really damaging for both the trustee board and the sponsoring company and it could also lead to members making more claims against the trustees for certain issues in relation to EDI.”

Christina Bowyer and Kieron O’Reilly talking to me earlier. Central to all of that is, of course, TPR’s General Code of Practice and their EDI guidance for both governing bodies and employers. We’ve put links to the Code and the guidance in the transcript of this programme for you. 

LINKS

- Link to TPR’s General Code of Practice
- Link to EDI guidance