Earlier this year we set bold new ambitions to drive down inequality among savers and to create a fairer and more inclusive culture across the pensions industry.
As the year draws to a close, I’d like to reflect on the progress we’ve made, and highlight areas where we think improvements can be made.
Our Equality Diversity and Inclusion (ED&I) strategy is a roadmap for change. We pledged to work with others across government and the industry to embed diversity and inclusion across pensions so that all savers are protected and outcomes improved.
Automatic enrolment has led to an explosion in the number of people saving. Every one of the 10.6 million savers now automatically enrolled deserves to be in a well-run scheme where decisions made on their behalf take into account their unique and varied circumstances.
As set out in our Corporate Strategy, we want all savers to get good value for their money and to ensure decisions made on their behalf stand up to scrutiny. Improving diversity across the pensions industry is fundamental to these goals.
Better decision making
It is clear to us that diverse groups make better decisions. Diversity among decision makers isn’t simply a desirable add on, it’s essential to ensure all savers get the retirement they are planning for.
The majority of trustees and those in the pensions industry are generally trying to do good things – to look after savers’ interests and deliver the best outcome for them. However, sometimes things go wrong and trustee boards do not take the right path. It is not deliberate and when we see these types of cases at TPR we wonder why no-one spoke up. Why didn’t they ask: are we sure this is a good idea? Are we sure we can bear the risk we are taking? Should we take what we are being told at face value or should we push a bit harder?
What I am describing is group think. This is an environment where people don’t feel comfortable speaking up or where there is no one around the trustee table who just looks at issues and challenges differently. A diverse and inclusive trustee board can make a difference.
Well-run schemes are those that have access to a wide range of perspectives, knowledge and skills, where everyone has equal opportunity to contribute and challenge from different perspectives.
Trustee boards which are not diverse risk knowledge gaps, entrenched ideas, biased thinking and poor decision making which puts savers at a disadvantage.
To be clear, diverse trustee boards may feel more uncomfortable, and that’s not a bad thing. There will be more debate and challenge, board meetings will take longer and have more disagreement. The trustee chair might have a tougher time building consensus. However, that will ultimately lead to better decisions, even though it won’t feel as straightforward as when everyone just nods decisions through.
We want to see all schemes large and small truly embrace the value of diversity and take strident steps to bring about change which will lead to better governance.
Building diverse boards means all of us pulling in the same direction, sharing information and working collaboratively. To this end, we set up an Industry Working Group to tackle the barriers to diversity and inclusion across the industry.
When we first called on industry to join the group we were delighted more than 60 representatives from across the sector wanted to be involved. It’s testament to a tide turning in favour of real change that so many people wanted to give their time and energy to improving decision-making on behalf of savers by making pensions a more level playing field for all.
Regular meetings began in January this year and an action plan is now well under way. Real inclusion means genuine discussion – this is not about treading well-worn paths and ticking boxes. We want to be thorough and ensure all volunteers have the opportunity to share their perspectives and expertise.
Our volunteers are producing some fantastic materials and insights that will help support the recruitment and appointment of more diverse trustees and also provide a baseline to measure how we are making progress. We all want to make a sustained difference, this is not a short-term initiative so it will take time to embed.
The working group now has four work-streams which will look at:
- the role data can play in bringing diversity and inclusion to governing bodies
- developing best practice in the composition of boards
- developing practical tools to share best practice on recruiting trustees
- delivering engagement with employers to help broaden the appeal of trusteeship
Over the coming months we will be sharing data, research and approaches with other regulators on how we can make a difference right across the financial landscape. There is a huge amount to do, but we must make significant change to make our industry more diverse and inclusive and where equality is a right not a privilege.
Leading from the front
As set out in our ED&I strategy, we want to lead from the front. If we are saying that ED&I is important for good governance in trustee boards then it clearly follows that the same is true of the leadership of TPR.
We have recently signed up to D&I pledges agreed with the UK Regulators Network, where all regulators are taking action. The pledges don’t only mean that we will be taking action within our regulated community but also as an employer.
Our ED&I strategy sets out the steps we are taking as an employer. In some areas, such as gender representation, we are already in a strong place – in other areas around ethnicity, sexual orientation and disability we have work to do, and that work is ongoing.
We intend to be very transparent around our own journey. We recognise it is not a simple and quick journey to create sustainable change. However, we hope our experiences will encourage others across the industry to embark on the same journey and to support each other as we navigate a path to inclusion and diversity which leaves no-one behind.
By David Fairs, Executive Director of Regulatory Policy, Analysis and Advice