The Pensions Regulator (TPR) has published equality, diversity and inclusion guidelines for trustees, IGCs and employers.
The regulator says it hopes the will be used by pension scheme governing bodies to improve the EDI of their scheme’s board.
This advice covers a number of issues, including specific guidance for scheme chairs. TPR says those in this position have a key role to play in making boards more diverse and inclusive.
The guidance covers how schemes set and monitor an EDI policy, with advice on covering agreed definitions and setting EDI aims and training plans. Assessments of the governing body’s performance should include how well EDI has been, and continues to be, embedded into processes, according to scheme objectives.
The guidance suggests that EDI goals and objectives, including ways to achieve a diverse and inclusive governing body, should be agreed at the start of the scheme year. Governing bodies should also regularly review and assess their body’s diversity of life experiences, expertise and skills, TPR says.
The guidance also encourages sponsoring employers to consider widening the pool of candidates for governing bodies beyond senior management positions. It also highlights the value being a trustee can have on an employee’s personal and career development.
TPR suggests governing bodies may wish to consider fixed terms, usually between three to five years, for member-nominated trustee positions to encourage a scheduled change to the trustee board bringing new perspectives to the group’s decision making.
Where there is a professional trustee, the guidance reminds it is possible for governing bodies to change the individual representative from the firm over time to support their board’s diversity. The guidance adds that governing bodies finding it challenging to address diversity gaps through member-nominated and employer-nominated trustee positions could consider an independent or professional trustee position.
TPR highlights the existing legal duties of governing bodies under the Equality Act 2020, to make reasonable adjustments for candidates and existing trustees with disabilities for example, to premises, equipment and technology or the role itself.
TPR has also added a section on inclusive communications to its guidance on communicating and reporting for defined contribution schemes.
The updates aim to help ensure scheme communications consider the diverse range of backgrounds, needs and vulnerabilities of their savers.
The pensions industry has welcomed this new guidance on this issue. Aon partner Susan Hoare described this guidance as “an important step in the right direction.”
She adds: “My experience is that many boards are keen to embrace EDI but don’t quite know where to start in a pensions environment.
“This guidance provides clarity and key areas of focus such as creating inclusive boards, inclusive communications with members, understanding the board’s diversity characteristics and skills, and recruiting diverse member-nominated candidates. This removes some of the ambiguity for schemes that didn’t know where to start – and, importantly, provides some case studies and examples of the actions boards can take.”
Hymans Robertson consultant James Smith says: ““It is good to see that TPR has now published this EDI guidance, a topic which did not feature significantly in the draft Single Code of Practice.”
Smith adds: “We are particularly pleased to see that TPR has included guidance for employers in addition to trustees and especially a sample job advert for a trustee. This will provide a framework for all stakeholders in this area and help to make the moves that are needed to ensure that boards are fully meeting the requirements, and embracing, equality, diversity and inclusion.
“We support the emphasis on the importance of the role of the chair in ensuring a strong culture of inclusion that values EDI, and the recognition in the communications guidance that consideration of vulnerable members is an important part of membership EDI considerations.”
TPR director of regulatory policy, analysis and advice Louise Davey says: “Harnessing diverse views can help pension scheme governing bodies weigh issues in more detail and openly consider aspects important to those impacted by their decisions.”
“This enables all those involved to better understand and mitigate scheme risks, avoid unintended consequences, and learn from what is working and what is not.”
“Employers also have an important role in ensuring EDI is considered by their scheme. And they have a duty to support employees who are nominated to their scheme’s governing body. That’s why we’ve provided specific guidance for scheme employers.”
Cardano Advisory CEO Darren Redmayne adds: “We recently commission research with Mallowstreet, which highlighted that there is industry consensus that improving DEI is a useful way to broaden a team’s skill sets as well as improve governance and decision-making for better member outcomes. We also saw that it is the professional trustee firms that are being the agents of change and playing a valuable role in helping the industry progress on DEI issues.”
