TPR publishes EDI guidance for scheme trustees and sponsors

The guidance is designed to assist governing bodies and sponsoring employers to improve the EDI of their scheme’s board. 

Louise Davey, TPR’s director of regulatory policy, analysis and advice, said: “All savers deserve to be in a well-run pension scheme that makes decisions in their best interests.

“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.” 

My experience is that many boards are keen to embrace EDI but don’t quite know where to start in a pensions environment

Susan Hoare, Aon

This will help all involved better understand and mitigate scheme risks, avoid unintended consequences, and learn from what is working and what is not, said Davey.

Since sponsors have an important role as they have a duty to support employees who are nominated to their scheme’s governing body, TPR provided specific EDI guidance for employers.    

“While we recognise that different scheme types, sizes and sectors may face different challenges, we believe there are some quick and easy steps that can and should be taken to improve schemes’ EDI now,” Davey said.

The guidance provides pointers for chairs of trustees in how they can make boards more diverse and inclusive. It also includes advice on some of the EDI-related considerations an employer will wish to consider when appointing a chair. 

The guidance recommends schemes have an EDI policy, with an agreed definition of EDI, the EDI aims of the governing body, and an EDI training plan. 

How well the objectives are met should be regularly assessed and embedded into scheme processes, with EDI goals and objectives agreed at the start of the scheme year.

‘Step in the right direction’

Aon partner Susan Hoare said the guidance was “an important step in the right direction”. 

“My experience is that many boards are keen to embrace EDI but don’t quite know where to start in a pensions environment,” she said.

“This guidanceprovides 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,” Hoare continued.

“It’s also great to see the focus on inclusive trustee boards. The tone on inclusion is set by the chair. If the chair doesn’t create the right atmosphere in the room – in the way they introduce topics, encourage others to contribute or make others feel that they can ask a ‘silly’ question – then a scheme won’t get the value of the whole board.”

Hoare also acknowledged the focus on inclusive language and communications. “Engaging members is about using the right tone, imagery, pronouns, considering those with disabilities and being aware of the reading age of your membership,” she said.

“Schemes ask members to make important retirement decisions, and it is essential that they are given the information in a way that allows them to engage and fully understand those decisions.”

A useful framework

Hymans Robertson consultant James Smith said that high-quality schemes are already taking action, integrating EDI into annual effectiveness reviews and constructing plans to widen board diversity and inclusion, and to factor member EDI into decision-making. 

“However, 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,” he said.  

“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 EDI.”

Not one size fits all

Eversheds Sutherland partner Emma King praised TPR for separating guidance into different counterparties who are involved in running a pension scheme. 

“By doing this, it shows that TPR recognises that different groups can use different levers to help improve EDI overall,” she said. 

“This guidance will help people to focus on the challenges they face and identify how improvements can be achieved. It is important to acknowledge that sponsors and trustees have different roles, influence and levers they can pull to improve EDI. 

“With other industries starting to pull together their own EDI proposals, this is an advantage which pension schemes can draw upon and could be an impressive and important distinction.”