Ensuring pensions cater for diverse populations is both an opportunity and a challenge.
In March 2023, the Pensions Regulator published its guidance on Equality Diversity and Inclusion (EDI) issues.
Since then, an increasing number of pension scheme trustees and employers have started to look at these issues in earnest.
The statistics on gender and ethnicity pension pay gaps are stark and show the need for change.
Cultural understanding may also be important however, as some traditions may prefer to secure retirement income from non-pension sources, such as buy-to-let properties, or inter-generational family support.
So this issue needs to be addressed sensitively to cater for the financial retirement needs of a diverse population.
If a trustee body and/or employer identifies a need for change, managing that change requires sensitivity.
Trustees from over-represented groups deserve recognition for their contribution, which in many cases can be measured in decades not years.
Trusteeship is mostly unpaid, a fact that is not often known or appreciated by people outside of the pensions industry.
The current generation of trustees have delivered huge improvements in member security, scheme funding and overall governance; a service employers would do well to recognise that across the whole of their organisation, not just in a pensions newsletter.
There are practices or techniques that can help involve retiring trustees in the process of ensuring pensions cater for diversity, helping to foster a sense of evolution not revolution and using their knowledge, experience and skill to help implement changes.
- Inclusion of succession planning in risk registers;
- A skills register for the board;
- Fixed or recommended periods of office;
- Mentoring programmes;
- Use of observer status at meetings for incoming and outgoing appointees either side of a change;
- Publicising the EDI strategy; and
- Training for candidates (not just appointees).
EDI as a professional development opportunity
There is also room for more employers to see EDI in pensions as an opportunity for career development.
For an up-and-coming recruit (perhaps on a talent management programme) pensions create an opportunity to be involved in dealing with a range of advisers, planning communication strategies, monitoring risks and rewards of different investment strategies and understanding economic and demographic assumptions.
All of these tasks develop skills that the business will need across its management.
These opportunities exist both within and outside traditional final salary schemes. Larger employers will normally have some form of governance group, even for its insurance-based or master-trust money purchase pension plans.
A diverse governance group brings a wealth of lived experience and understanding which cannot easily be replicated without that diversity.
Following the trend of EDI requirements in the regulation of listed companies and financial service providers, further regulatory change in the pensions sector is likely.
Express metrics for board composition are difficult to define as diversity covers a range of characteristics, some of which are legally protected.
So change is likely to be gradual and phased, probably with an emphasis on disclosure and reporting.
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