Pinsent Masons partner Christina Bowyer chaired the panel session
In January, Pinsent Masons and Lane Clark & Peacock (LCP) organised a panel of experts to discuss how pension schemes can translate The Pensions Regulator’s (TPR's) new equality, diversity and inclusion (EDI) guidance into actionable steps.
See: TPR - Detailed guidance on equality, diversity and inclusion
The panel discussion explored how a well-managed approach to ED&I can enhance trustee board decision-making and member outcomes. The panellists also discussed practical ways to drive meaningful change in the industry while adhering to TPR's guidance.
Understanding EDI
Kieron O'Reilly, a senior consultant in Pinsent Mason's diversity and inclusion (D&I) consultancy Brook Graham, emphasised the importance of taking a holistic approach to D&I. He suggested it is crucial to consider a wide range of often hidden characteristics when discussing diversity, rather than just focusing on the nine protected characteristics outlined by the Equality Act 2010.
This is particularly important for pension schemes, since TPR has adopted the definition of diversity used by the Pensions and Lifetime Savings Association which is much broader than that of the Equality Act.
In addition, O'Reilly explained the difference between equity and equality, which are often confused. He said equity is ensuring that people are treated fairly, while equality is treating people the same. It is therefore promising that around 72% of attendees reported understanding the distinction between the two concepts.
TPR's expectations
TPR aims to ensure that schemes comply with its guidance by adopting a proportionate approach.
TPR EDI lead Sandisiwe Dhlamini stated that the regulator wants to encourage compliance by equipping pension scheme chairs and trustees with the skills they need to make inclusive decisions and through succession planning for chairs and trustees, including the appointment of new member nominated, employer nominated and independent trustees.
Dhlamini emphasised the importance of having a diverse trustee board and its link to the value for money framework. The framework stresses the significance of promoting better communication and engagement with members to ensure that they make the best decisions for themselves. Dhlamini argued that this communication can only be effective if trustee boards understand the needs of their members, which can be achieved through having diverse trustee boards.
The risks of ignoring EDI
Ignoring TPR's guidance comes with many risks. LCP partner David Fairs - the former executive director of regulatory policy analysis and advice at TPR - says one of the most apparent risks is groupthink, which can often lead to catastrophic decision-making.
Fairs cited a recent case in which a sponsoring employer set up a pension arrangement where the trustees did not include a sharia investment fund, while 75% of the membership were Muslim. Such situations can lead to reputational damage for trustees and sponsoring employers, and trigger an influx of member cases.
A poll of audience members at the panel discussion found around 62% had begun to incorporate approaches to EDI into their scheme business plans.
The impact of a good approach to EDI
According to O'Reilly, the first step to a well-managed EDI approach is for pension scheme trustee boards to recognise that they can't possibly represent everyone. He suggested that there should be a greater focus on diversity of thought, which can lead to better decision-making and cited the case of Walker v Innospec, in which it was ruled that same-sex couples should have the same pension rights as opposite-sex couples.
O'Reilly highlighted that the reason the trustees of the scheme had discriminated against same-sex couples was because the trustee board found it difficult to understand the lives of certain pension scheme members. He argued it is clear that if trustees have a greater understanding of their members, this can be of great benefit to scheme members.
Practical steps to drive change
Trustee boards and sponsoring employers can take several practical steps to meet TPR's requirements for EDI.
One of the most obvious steps is to put EDI on their meeting agendas and initiate discussions. According to Fairs, many people think of the barriers to having a diverse trustee board. This is often borne from a misunderstanding of what EDI is and how it applies. Fairs explained that by taking steps such as gathering scheme data to ascertain its demographic, reviewing board effectiveness and decision-making processes, using advisers to widen the diversity pool, reviewing member communications and building a culture of diversity backed by policy, much progress can be made.
TPR's plans going forward
Dhlamini has urged schemes to consider barriers and how they can be overcome. TPR will support schemes by analysing the evidence gathered through its first trustee diversity and inclusion survey and ongoing engagement via its scheme supervisors to provide practical guidance and case studies on the steps schemes can take to make change happen.
Final messages
There were several key takeaways from the discussion. Fairs emphasized that diversity and inclusion are inseparable; one cannot exist without the other. O'Reilly stressed the importance of ensuring that individuals realise that they themselves are part of diversity. Lastly, Dhlamini advised everyone to read TPR's guidance and take actionable steps based on it.
Christina Bowyer is a partner at Pinsent Masons
