The Pensions Regulator is keen for the pensions industry to recognise that diverse trustee boards make better decisions, and better decisions lead to better outcomes for pension members. So, if you are considering diversity and what it means for your pension scheme, is the action required simply a case of getting the right mix of people on to a Trustee Board or a Governance Committee, or do you need a Diversity and Inclusion (D&I) policy?

The term diversity covers so many things, but to put it simply, it is something that differentiates groups and individuals from each other. Inclusion is about finding ways to ensure that all individuals are involved, valued and supported. If we consider this in the context of pension schemes and the key levers that are important for good pension outcomes, D&I must be woven through the fabric of the scheme. 

For investments, D&I might present the need for a fairer range of self-select funds. My colleague recently wrote a blog on the lack of options for those keen to invest in Shariah compliant investment funds. D&I also has a role in the performance of your default fund - there is a mountain of evidence to suggest that investing in well run companies with diverse boards will deliver better investment performance over the long term.

And then there’s communication: age, sex, religion, education, socio-economic background and many other diversity factors are all relevant in terms of how individuals view themselves, and therefore what influences their decision making. You’re likely to see this in your own pension scheme as it presents different savings behaviours and attitudes to risk, and it’s probably the driver behind your age-segmented communication campaigns. But how inclusive is the language, imagery and channels you use when you are communicating with your members? What about vulnerable and disadvantaged members? How do you ensure that you take members’ needs into account when helping them to navigate saving and planning for retirement? What about ensuring there is consistency and fairness when tackling any discretionary member-related decisions?

There is also a role for considering diversity in terms of advisers, fund managers and pension providers. In order to realise the full potential of your pension arrangements to the benefit of your members, you need partners who don’t bring their own bias, who will help you challenge and see the perspectives of all of your members, and who will then support you in implementing any changes you want to make.

If I go back to my original question, is the action required simply a case of getting the right mix of people onto a Trustee Board or a Governance Committee, or do you need a D&I policy? I suspect the answer is both. It’s unlikely you will be able to get a Committee who proportionally represent the diversity of your members. In fact, it might even be a challenge to get sufficient data to fully understand the diversity of your members. Therefore, the first steps to building your D&I policy should be D&I training, what this means for your scheme and how this aligns with your company’s strategic goals.

If you would like any more information on how to approach D&I in your pension scheme, then please contact me, or your usual Hymans Robertson contact.