Addressing diversity in pension trusteeship

Pension trustee boards are keen to address diversity issues highlighted by the Pensions Regulator in a recent survey.

TPR’s first Trustee Diversity and Inclusion survey showed the average trustee is a white man who is over 45. It polled more than 2,000 trustees, 78% of whom said they felt a diverse trustee board was important.

In addition, 84% said that diverse and inclusive trustee boards were important for good decision-making, 83% said diversity was needed for good governance, while 85% said diversity would support better member outcomes.

Katie Stone, senior client relationship manager at Trafalgar House, said that while TPR’s findings “underscore a persistent challenge” within the pensions industry, there was a “strong commitment” to improving diversity, particularly among professional trustees.

She added: “However, it's clear that sponsor culture plays a pivotal role in shaping the composition of trustee boards. Employers historically dominated by men tend to perpetuate similar patterns with their member nomination directors. This reflection mirrors the broader challenge of fostering diversity at company director level, a necessary step for meaningful industry-wide change.”

Tim Middleton, director of policy and external affairs at the Pensions Management Institute, said it has been promoting the importance of diversity and inclusion on trustee boards for many years, including through working with scheme sponsors, professional trustee firms and employee groups to promote diversity through effective succession planning.

“We are committed advocates for real diversity on trustee boards and are encouraged by evidence that the face of trusteeship is showing signs of change,” Middleton said.

‘Forums for change’

“It’s essential for boards to engage in open, honest conversations about how they can attract a more diverse membership,” Stone continued. “This includes examining their communication strategies and scrutinising their own working practices for inclusivity.

“How accessible and flexible is participation for individuals with families or those offering different perspectives? Unfortunately, many boards still do not present as welcoming or open forums for diverse voices.”

Kim Nash, managing director at Zedra Governance, added that the pensions industry can take steps to improve diversity on boards, such as being aware of the benefits of diversification and how small changes can impact how a board operates.

Building an inclusive environment was also important, she said, as well as regularly reflecting on what boards can do to improve their approach and processes. Nash said it was important to learn from others on best practice both within the industry and outside of it.

Other professional trustee firms are actively working to improve the diversity of their workforce. At Dalriada Trustees, the firm has sought to maintain a gender balance and recruit younger trustees - its youngest accredited professional trustee is in their early 20s, according to managing director Chris Roberts. It also participates in the 10,000 Black Interns programme and has internal projects to amplify diverse voices.

“We have broadened our geographic base to span the whole UK to give access to wider and more diverse recruitment pools and we have consciously not set minimum educational standards to avoid unnecessary barriers to neurodiverse colleagues,” added Roberts. “We are currently looking at options to create entry-level academy/graduate roles to allow new entrants to the sector broadening the talent pool. We have also delivered the initial stage of a project to build a more diverse leadership team.”

One trustee’s experience

“When I first moved into trusteeship 12 years ago I looked very different to most independent trustees. I was young, female and focussing on trusteeship for my career,” says Nash, recounting her own experience in the industry.

“All of these characteristics were unusual then. I thought you had to have 30 years’ experience in the pensions industry to be a trustee and here I was with less than 30 years’ life experience. Being different served me well and the energy, challenge of the status quo and my ability to bring people together meant I quickly built my client portfolio.

“I am pleased to say the market has evolved since then and we are seeing a more diverse pool of people enter trusteeship and view trusteeship as a career rather than something you do as a step to retirement.

“There is more to be done to continue to make sure the people around the table bring diverse views and are able to drive change for the members we represent.”

Turning words into action

Gillie Tomlinson, head of trustee engagement at Cardano, said: “Our own research backs up the idea that [diversity] sits much higher on schemes’ agendas than it used to, with a surge of firms having set strategies and targets over the last year.

“However, what our and TPR’s research clearly shows is that boards are now struggling to turn those words into actions. Practical progress needs tangible commitments, including trustee succession plans which prioritise [diversity], and an industry-wide focus on collecting comprehensive data to monitor the effectiveness of policies.”

TPR’s survey results will provide a “baseline” to measure progress towards ensuring high standards of diversity and inclusion on pension boards, the regulator said.

The survey highlighted that most trustee boards were seen as diverse in less visible characteristics. Four in five (82%) had a diversity of skills, three quarters (74%) cited diversity of life experience and a similar proportion (73%) in professional background.

Shayala McRae, deputy chair of the Society of Pension Professionals’ legislation committee, said: “We are heartened to see that most trustee boards are now widely felt to be diverse in terms of less visible characteristics such as skills, education, professional background and life experience and also that the majority of trustees recognise the importance of inclusive and diverse boards and the benefits that can bring in terms of good governance and improving saver outcomes.

“This is reflective of the greater focus on diversity, equity and inclusion that we are seeing within the pensions industry and the impetus and commitment created by various industry initiatives, which must surely and steadily move the dial in the right direction in this important area.”

Further reading

‘Meaningful targets’ needed to address industry diversity issues (5 February 2024)

How can trustees work towards more diverse boards? (8 November 2023)

More than a third of schemes ignore own trustee diversity data (27 September 2022)