Equality, Diversity & Inclusion
The launch in March of The Pension Regulator's (TPR) guidance on Equality, Diversity & Inclusion (EDI) was a milestone for pensions.
Although for many years well-run schemes have been incorporating EDI into their structure and decision making, the guidance from TPR supplied clear direction for all trustee boards, and crucially, their corporate sponsors.
The guidance from TPR is principles driven and pragmatic. Recognising that while EDI issues can be complex, there are “quick and easy steps that some schemes can and should take to improve EDI now”.
How can the advisory community assist Trustees and Sponsors with their EDI decision-making?
A good first step is to recognise that the guidance from TPR, although directed at Trustees and Sponsors, provides a great set of principles for their advisors to follow also.
One thing TPR suggest is that EDI outcomes can be improved by widening the pool of people from which Trustees are generally drawn. Advisors can support in this area by ensuring that new trustees that may not have come from a finance or legal background can receive tailored training and development as they move into their trustee role.
While Trustees hold the ultimate responsibility for running their scheme, some actions are commonly delegated to advisors. Ensuring EDI is considered as a core part of items such as running a Member Nomination Trustee (MNT) selection exercise, and designing member communications will help schemes maximise their EDI potential.
This extends to situations where an advisor acts as secretary to the trustee board and where they can help to organise and structure meetings in a way that is inclusive for all and encourages full participation from every member of the board. Where there is a risk of “groupthink” emerging, mechanisms that encourage divergent and individual thinking will help better decisions to be made. This could lead to better policy design, better investment choices, and a reduction in the risks faced by the pension scheme.
Where advisors are supporting clients in making changes to their pension arrangements or setting up new schemes, it is important to consider the wider impact of these changes in terms of their impact on their employees. There is a well-researched gender pensions gap in terms of the value of funds at retirement and similar gaps will exist when looking at different socio-economic groups. Scheme design changes that look to address this (for example when considering how maternity leave is accounted for within pension schemes, and dealing with members wishing to work part-time) will be beneficial in terms of supporting the narrowing of these gaps and promoting economic stability.
Time to change
There is an enormous array of ways that pension schemes can improve their EDI impact, and the TPR guidance sets these out in a very accessible level of detail. Following these principles and challenging the status-quo will lead to better decisions being made and an improvement in the impact that individual pension schemes can make to their members, trustees and corporate sponsors.
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