TPR publishes first EDI guide for schemes and employers

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The Pensions Regulator has published guides on equality, diversity and inclusion for pension scheme governing bodies and employers, and has updated its guidance on communicating and reporting for defined contribution schemes to address EDI. 
 
TPR is hoping the guidance will be used by schemes and employers to improve their diversity, equality and inclusion and thereby improve decision making. It was developed with the help of an industry working group which first met in early 2021. 
 
“All savers deserve to be in a well-run pension scheme that makes decisions in their best interests,” said Louise Davey, TPR’s director of regulatory policy, analysis and advice. 
 
“Harnessing diverse views can help pension scheme governing bodies weigh issues in more detail and openly consider aspects important to those impacted by their decisions. This enables all those involved to better understand and mitigate scheme risks, avoid unintended consequences, and learn from what is working and what is not,” she added. 
 
Davey noted that employers also have a role in ensuring EDI is considered by their scheme and a duty to support employees who are nominated to their scheme’s governing body.  
 
“While we recognise different scheme types, sizes and sectors may face different challenges, we believe there are some quick and easy steps that can and should be taken to improve schemes’ EDI now,” she said. 
 
Recent research by mallowstreet in partnership with Cardano found that 63% of pension professionals believe DEI is beneficial because it can broaden a team’s skill sets and improve decision-making, but 58% said the industry is slow to adopt it as it is a low priority.  
 
The majority (68%) of respondents said they do not follow any major DEI standards. Large schemes were more likely to have thought about the topic, as 60% of schemes above £10bn have a DEI strategy or plan to set on in the next 12 months, while the vast majority (71%) of schemes below £1bn do not have a DEI strategy or immediate plans to set one. 
 
The existence of guidance without any regulatory ‘stick’ - such as the Financial Conduct Authority has for company boards - raises the question of whether action will follow. Some have argued in favour of diversity quotas or introducing ‘comply or explain’ disclosure requirements, but many still believe in a voluntary approach, despite the slow progress. 
 
    

Schemes encouraged to have EDI policy and review own backgrounds 

 
The chair is in the strongest position on a board, and TPR’s guidance says they should play a key role in making boards more diverse and inclusive. Employers should also consider EDI when appointing a chair. 
 
It also suggests pension schemes should have an EDI policy which includes a definition of EDI, its aims of the board and a training plan.   
 
Widening the pool of candidates for governing bodies beyond senior management positions should be considered by employers, the guide says, and offers an example trustee recruitment advert and leaflet.
 
Any board performance assessments should cover how well EDI is embedded into processes, and boards should regularly review their diversity of life experiences, expertise and skills, TPR said.  
 
They could consider fixed terms of three to five years for member trustees to regularly bring in fresh blood, it suggests; similarly, it notes that professional trustees can be rotated between individuals in the firm. 
 
How schemes communicate also has implications on who feels addressed and engaged. The regulator has therefore updated its guide for communicating and reporting for defined contribution schemes with a section on inclusive communication, considering accessibility and bias. Trustees are legally obliged to ensure disabled people can access their communications. 
 

Do you plan to use the guidance to update your scheme’s practices? 

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