Diversity – what does it mean for pension trustees?
We are soon approaching the ten year anniversary of the enactment of the Equality Act 2010, which made it unlawful to discriminate against others on numerous grounds. Pension trustees will be used to ensuring equal treatment on this basis.
But there’s a difference between equal treatment and non-discrimination, and diversity.
What is diversity?
When we talk about diversity, the answer is much more simple than you may think. Diversity does not mean meeting quotas, so that a group of people is 50/50 men and women, different races, the young and the old. Diversity, put simply, just means difference.
Why should trustees be concerned with diversity?
The Pensions Regulator summarised this neatly in its response to its consultation on The Future of Trusteeship and Governance earlier this year when it said that, “there is clear evidence that diverse groups make better decisions than non-diverse groups.”
So a diverse trustee board will make better decisions than a board that thinks the same, or has ‘group think’. That, in turn, leads to better governance. This should then create better engagement with members. Further still, at least in a DC context, this should then result in better outcomes for members when it comes to their retirement savings and choices. And surely this is what all of us working in pensions are really working towards?
How can a trustee be diverse?
When it comes to a trustee board, there are, in my view, two key questions that trustees may need to ask themselves about diversity:
- Do we, as a board, adequately represent differences in the scheme membership so that the full spectrum of member needs is understood?
- Do we, as a board, represent a diverse range of individuals in terms of skill set, approach to decision making and perspective?
To assess whether a board is diverse, it needs to look closely at what it is and what it could be, measured against the membership. Criteria such as age, job role, salary and career goals are likely to be important to the interaction between the board and what the members need. Are these considered? Perhaps not. What about whether you are creative or methodical? If you take decisions intuitively or if you like to be steady and thorough? There’s no right answer here – each board will need to decide what it considers most important for its scheme and members.
What can we do about it?
There are limitations on how a board can control its make-up. Typically, the power to appoint will rest with the company and, to some extent, the members. But there are things a board can do to influence diversity in the selection of trustees.
And that is not the end of the challenge.
Once in place, a diverse board will not necessarily lead to better decision making if diversity in thought is not encouraged by board conduct, an effective chair and access to training.
If you’re interested in the steps you can take to address the diversity of your board, please contact me or your regular Sackers contact for further information.