Research: Professional trustee firms are incorporating diversity into their business strategies

The UK pensions industry is slowly but surely embracing diversity, new research has found. 

New Mallowstreet research commissioned by advisory firm Cardano has revealed that pension schemes and professional trustee (PT) firms are embracing equality, diversity and inclusion (EDI) as a fundamental part of their business strategy.

The annual research, which surveyed 120 UK pension funds and PT firms, found that 46% have now implemented EDI strategies, which is a substantial rise from 26% in 2022. 

A further 28% of schemes and PT firms have established specific EDI targets. This is a significant increase from the 11% reported in 2022. 

The data found that the majority of schemes and PT firms endorse EDI. In fact, 60% of survey respondents believe endorsing EDI leads to better governance and decision-making, while 62% see it as a way to broaden skillsets. 

Gillie Tomlinson, head of trustee engagement at Cardano, said: “It’s positive to see the importance of EDI continue to rise up the agenda. We are seeing a growing appreciation of its benefits among schemes and trustees alike. The increase in both target- and strategy-setting is indicative of the pension industry's growing commitment to fostering robust policies and driving positive change.” 

The findings also showed increased engagement with sponsors. Specifically, 50% of defined contribution (DC) schemes and 50% of trustee services firms have demonstrated greater proactivity in discussing EDI with sponsors.

They also expect higher EDI standards of providers. In fact, 43% of DC schemes report they would refrain from giving a mandate to a provider which fails to meet their EDI standards, in contrast to 46% of defined benefit (DB) schemes which would take no action. Interestingly, 50% of PT firms would consider requesting a change to the composition of a provider’s team if they failed to meet their EDI standards. 

Despite the success, the data has found that there has been slow progress in recruiting talent.

The research highlights recruitment as the most common challenge, with 46% of pension professionals citing the failure to attract diverse talent as a primary barrier to improving EDI.

Inclusion is getting better – but there’s work to do

Social and gender inclusivity has improved. People who attended state schools are better represented on the majority of trustee boards. In fact, 46% of trustees work at schemes where at least 80% of the board attended state schools, while 21% of respondents work at schemes where at least 40% of board members are women. This is up from 17% in 2022. 

However, respondents acknowledge the need for greater efforts to attract a more diverse range of talent, especially from underrepresented groups such as neurodiverse individuals, minority ethnic backgrounds, or people with disabilities. 

The research also found that the absence of comprehensive diversity data also poses a significant risk to the effective measurement of EDI and progress of initiatives across the pensions industry. 

A massive 34% pension schemes do not collect any diversity data on members at all. 

Among those that do, the focus is often limited to basic characteristics. Only 59% collect data on age, 43% collect data on gender and 42% collect data on marriage or civil partnership status. Worryingly, this data deficit extends to PT firms, where only 36% collect EDI board statistics. 

Tomlinson said: “Despite this positive momentum, there remains a substantial and persistent EDI gap that requires attention. 

“Incorporating measures such as knowledge transfer, mentorship programmes and career development pathways can also help bring about a more inclusive pension landscape. 

“It is also essential to recognise that effective management hinges on accurate measurement. Collectively across the industry we need to collate more precise data to monitor the progress and effectiveness of our EDI efforts. Progress has been made, but we cannot afford to lose momentum."