Most trustees and other governing bodies of occupational pensions schemes will know that the Pensions Regulator ("tPR") is placing an increasing emphasis on the importance of equality, diversity and inclusion ("EDI") in scheme management. 

In its EDI overview published in March 2023, tPR outlines the principles for how governing bodies should approach EDI issues and offers some practical ideas for implementing them. It notes that:

“Equality, diversity and inclusion are interlinked. Having people with different life experiences might mean that a governing body is more ‘diverse’, but if those people are not and do not feel respected (unequal) or heard (where inclusion is lacking), then the governing body will not benefit from the full talents and experiences of those people.”

tPR explains that studies have shown that diverse groups of people make better decisions where there is also equality and inclusion. In the context of managing an occupational pension scheme, tPR believes that a diverse and inclusive governing body will lead to:

  • wide discussion encouraging new thinking and approaches
  • more effective decision-making that reflects member needs and values
  • improved value for money for savers
  • deeper understanding of issues that have a real-life influence on savers’ outcomes
  • better decision-making that impacts quality of life for a wide range of individuals
  • greater understanding, insight and empathy for scheme beneficiaries on things like discretionary death benefits and ill health decisions
  • improved communications with scheme members 

Sounds good - but does it really make any difference? 

tPR recognises that creating a diverse and inclusive governing body might not be quick or easy.   Why, then, should trustees or other governing bodies go to the trouble of implementing an EDI policy? Does it really make any difference to member outcomes in practice? 

Actually… yes, it does. This recent article from Pensions Expert on How the pensions industry can better support people with mental health problems illustrates why and how. Although it focuses specifically on the needs of those among us who have mental health challenges, the article outlines issues that apply equally to any one or more aspect of our identity that puts us at risk of discrimination, inequality or under-representation, whether that's our race, gender, gender identity, sexual orientation or disability. It shows that a lack of diversity of thought and experience at management level trickles down through every aspect of scheme governance leading, ultimately, to challenges with member engagement. This in turn leads to a risk of poorer financial outcomes during retirement for disadvantaged groups.

Among the difficulties highlighted is the struggle to find accessible information about pensions savings: rather than helping people to understand their options, for many people the way support, advice and guidance is designed and delivered often creates “psychological and practical barriers that can end up pushing us further away from support”.  On top of this, promotional materials might be creating an unhelpful image of who pensions services are for:  "Adverts for retirement planning feature middle-class people with a stable income and a large savings pot, and so can leave people unsure where to turn if they don’t fit this image."

Engagement matters.

This feeling of exclusion matters: a recent article from Pensions Age highlights the problem of "pension ostriches" who "refuse" to engage with pensions. It cites research from Barnett Waddingham which shows that more than a quarter of defined contribution (DC) savers have never logged in to check their pensions online, and two thirds have never discussed their pension with a financial adviser. According to the article, the research shows that  "most British savers are either trusting or apathetic about their pensions, as almost three quarters (72 per cent) have never changed how their pension is invested".

But is trust and apathy really the issue? Are people "refusing" to engage with their pension savings? Or is it (as the Pensions Expert article suggests) that people have been given the impression that pensions information and support is "not for them"?

The way scheme information is presented will also impact on scheme governance. Many trustee boards will have had challenges in meeting their member nominated trustee ("MNT") obligations, with scheme members apparently reluctant to engage with the recruitment and nomination process. Is the lack of engagement down to apathy and a refusal to get involved, or might there be a sense amongst members that pensions trusteeship is "not for them"? 

What can be done?

tPR's EDI guidance for governing bodies includes some helpful suggestions for improving EDI at trustee board level. Among these are the way that trustees communicate with members about governing body roles. Communications should:

  • be accessible (including a range of formats);
  • be easy to understand; 
  • be representative of the diversity of scheme membership (and the general population);
  • offer reassurance that all skills are valuable and no prior knowledge of pensions is needed; and
  • explain what support (including training, and reasonable adjustments for candidates with accessibility needs) will be given in performing the role.

tPR's guidance focuses specifically on communications about governing body roles, but trustees should take the same approach to all member communications.  The Pensions Expert article sets out practical steps for pensions professionals to make it easier for people with mental health challenges to access support and advice: we think this approach would benefit all members, and should be seen as good practice for all member communications. 

How your advisers can help.

tPR also suggests that governing bodies should look to their professional advisers to support their EDI objectives, including asking express questions in tenders about the EDI credentials of the candidate organisations, and what diversity of thought they could add to the governing body. 

We agree, and would encourage trustees and other governing bodies to ask their advisers to demonstrate a commitment to EDI issues. In particular, trustees should not be afraid to challenge advisers to deliver advice, or documents intended for members, in a way that is accessible and easy to understand. Pensions is a notoriously complex and technical area and not easy to simplify, but that doesn't mean we shouldn’t try.  As a general rule of thumb, if you are struggling to understand a piece of  advice or information you've been given, then the problem is more likely to be with the way it has been presented than with your powers of understanding. Even when we think we are using "plain English", we advisers can fall into the trap of calling a spade a "flat-bladed digging tool": trustees should feel able to push back on any information given to them which uses unnecessarily complicated language or jargon. 

So, where do we start? 

Like tPR, we know that starting a sincere and authentic conversation about EDI is difficult and (if you're doing it right) probably uncomfortable.

The outcome of tPR's 2023 EDI survey (published in March this year) showed that there is less diversity among pension scheme trustees than among the general population. More than half (53%) of trustees are white, male, aged 45 or over, heterosexual, non-disabled, either Christian or with no religion, and not transgender.  

If this is the "typical" trustee, it may be that many trustee boards feel very committed to the principles of EDI, but feel ill-equipped in practice. They may worry about creating something that is little more than a "tick-box" exercise, or inadvertently causing offence by well-meaning attempts to be more inclusive. This fear of getting it "wrong" can be one of the greatest barriers to progress, and we'd encourage trustees (and all of us involved in the pensions industry) not to shy away from the difficult conversations that may be involved. 

Our own experience at Burges Salmon shows that the effort and discomfort is worth it. We're also operating in a historically white, male-dominated environment, and it's taken time for our EDI agenda to get off the ground and build momentum. Like most professional services firms we still have a way to go, but the sincerity of the effort has never been doubted. This is reflected in the firm's culture and its people's sense of engagement and belonging, as evidenced by (among many other accolades) us being named Roll on Friday's "Best firm to work for 2024" for the third year running - something we are especially proud of, because it's based on the survey responses of our own people. We have also recently had confirmation that Burges Salmon has retained the Platinum Investors in People Accreditation (first awarded to us in 2021), placing the firm at the top of the legal benchmark and ranking it in the top 5% of all organisations engaging with Investors in People.

We'd love to help you to start thinking about how EDI affects your scheme and its members, and to support you in building whatever change is needed. If you'd like to know more, please get in touch with Alice Honeywill or Amy Davies, or your usual contact in the Burges Salmon Pensions and Lifetime Savings Team.