UK pension funds are not prioritising diversity and inclusion across trustee boards, The Pensions Regulator (TPR) has warned, following recent research.
Following these worrying new figures – just 10% of defined benefit (DB) schemes and 14% of defined contribution (DC) schemes were collecting trustee diversity data but of those that were, two fifths of DB schemes and nearly half of DC schemes said that they had no plans to use the information – TPR published an action plan in partnership with the pensions industry to improve diversity and inclusion across trustee boards.
The Equality Diversity and Inclusion (ED&I) action plan sets out steps TPR, in partnership with the Diversity and Inclusion Industry Working Group (IWG), will take to encourage and support trustees to recruit diverse candidates and create a culture of inclusion.
It sets out how TPR will set trustees clear expectations on diversity along with providing practical tools and information on recruiting diverse candidates, creating and maintaining an inclusive culture, engaging with employers on diversity and ensuring communications to scheme savers are inclusive.
As set out in TPR’s corporate strategy, improving diversity and inclusion on trustee boards is essential to effective decision making so that all savers get good value for money.
Yet concerning findings from its research – such as trustee gender and age were each formally recorded only by 7% of DB schemes, increasing to 13% of DC schemes.– shows too few trustees are prioritising diversity.
Acquiring good data on scheme diversity is essential to bring about and measure improvement however, the survey revealed schemes are failing to collect the data they need.
Among schemes that were not recording trustee diversity data, 41% of DB schemes and 30% of DC schemes said they had not thought about collecting it and, worryingly, 35% of DB schemes and 43% of DC schemes felt there was no need to capture this information at all.
David Fairs, TPR’s executive director of regulatory policy analysis and advice, said :“Our research shows that trustees have a long way to go towards embracing the importance of diversity and inclusion. The status quo is not acceptable.
“Trustee boards that are not diverse risk knowledge gaps, entrenched ideas, biased thinking and poor decision making which puts savers at a disadvantage.”
He said that TPR wants to see trustee boards with a wide range of perspectives, knowledge and skills and where “everyone has the opportunity to contribute and challenge from different perspectives”.
The survey was carried out to help inform progress on TPR’s ED&I strategy which set ambitious targets to boost diversity and inclusion across the pensions industry. The research data will be used to set a baseline so that TPR can measure its success in respect of encouraging trustees to become more diverse and inclusive.
Janice Turner, co-chair of the Association of Member Nominated Trustees (AMNT), said: “We believe that success for a trustee board is going to involve active engagement with the scheme sponsor, not only in relation to the appointment of employer-nominated trustees but also in order to enable the scheme to have a more diverse pool from which to attract member nominated trustees.”
She added: “We hope that TPR recognises that trustee boards are to a significant degree dependent on the employer’s own success at achieving diversity among their workforce. If trustees are recruited from among the scheme members in a company’s workforce, and that workforce is not diverse, then it will be very difficult to improve the situation on the trustee board unless the employer itself improves diversity within the workforce.”
In those cases, Turner noted, it would be necessary for trustee boards to engage with employers and encourage them to take action themselves. ”There is an inextricable link between trustee action and success and employer action and success.”
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