More than one-third of the pension schemes that collect trustee diversity data have no intention of using it, the Pensions Regulator has found, as it publishes an action plan to boost boards’ diversity and inclusion.
Only 10 per cent of defined benefit schemes and 14 per cent of defined contribution schemes have been collecting any trustee diversity data at all, according to new research from TPR. Of those that did, 40 per cent of DB schemes and 47 per cent of DC schemes saw no use for the data.
Among the schemes that did not collect the data, 41 per cent of DB schemes and 30 per cent of DC schemes said that they had not considered doing so.
Trustees have a long way to go towards embracing the importance of diversity and inclusion
David Fairs, TPR
Thirty-five per cent of DB schemes and 43 per cent of DC schemes, meanwhile, did not think capturing trustee diversity data was necessary.
“Our research shows that trustees have a long way to go towards embracing the importance of diversity and inclusion. The status quo is not acceptable,” said David Fairs, TPR’s executive director of regulatory policy analysis and advice.
Three-quarters of DB schemes have no plans to collect data
The pensions watchdog collected its information from 699 DB schemes via an online survey in April and May this year that focused only on diversity. Meanwhile, 305 DC schemes answered questions on this topic in TPR’s annual telephone survey of DC schemes for 2021, which took place between October and December 2021.
Trustees are under increasing pressure to consider the diversity of their boards. The Association of Professional Pension Trustees recently launched a “hints and tips” briefing on diversity and inclusion, which gives advice on a range of topics including diversity of thought and trustee selection.
DC master trusts were significantly ahead of other DC schemes and DB counterparts on the recording of trustee diversity data, with 31 per cent of master trusts doing so, compared with an average of 14 per cent among DC schemes.
Shula PR and Policy managing director Darren Philp speculated that master trusts were ahead in this area "due to the fact that master trusts are competing for business and get asked a lot more questions" as part of their bidding processes.
On the DB side, micro-sized and small schemes represented the biggest proportion of schemes that collected diversity data, at 12 per cent. This was ahead of an overall average of 10 per cent.
The most common use of the data was for monitoring purposes, followed by trustee recruitment and for the purpose of training board members.
The watchdog pledged to ask why those schemes that collect the data, without using it, did so in the first instance.
Almost half of large DB schemes (48 per cent) did not capture the data, compared with 41 per cent overall. Large DC schemes were also the biggest culprit in this category (35 per cent), versus a 30 per cent average.
Almost three-quarters of DB schemes that did not collect the data indicated that they have no intention of doing so in the future, with a further 16 per cent being unsure.
“Trustee boards that are not diverse risk knowledge gaps, entrenched ideas, biased thinking and poor decision-making, which puts savers at a disadvantage,” Fairs said.
“We want to see trustee boards with a wide range of perspectives, knowledge and skills, and where everyone has the opportunity to contribute and challenge from different perspectives.”
Collecting data mechanism to be set up in 2024
The watchdog published the research on September 27 alongside its own equality diversity and inclusion action plan.
TPR implemented a new diversity and inclusion strategy in 2021, while also creating an industry-led diversity and inclusion working group, made up of more than 60 industry representatives in a bid to help boost diversity on trustee boards.
The regulator said it is working with the group to produce a series of guides, case studies and tools for trustees, employers and their advisers. It will aim to publish this guidance by the end of the 2022-23 financial year.
The guidance will concentrate on areas including the meaning of diversity and inclusion for governing organisations, how to attract diverse candidates to trustee roles, and how to ensure member communications are inclusive.
TPR approached a ‘number of times’ by capital-backed consolidators
The Pensions Regulator has been approached a “number of times” by companies working on capital-backed consolidation models, according to Charles Counsell, who has called for superfund legislation.
TPR also said that it is exploring “developing a suitable mechanism for collecting data in the longer term to measure progress”, which could include running periodic trustee surveys, including questions to the scheme return or service for data reporting and measuring progress using existing yearly surveys.
It pledged to decide on a mechanism for collecting diversity data by the end of the 2023-24 period.
The regulator’s third “action” committed it to working with its “stakeholders and the regulated community” to support governing bodies on diversity.
