This overview defines equality, diversity and inclusion (EDI) and outlines why improving EDI in pension scheme governing bodies is important.
Published: March 2023
Summary
Use alongside our EDI guidance for governing bodies and EDI guidance for employers, which provide practical guidance on improving EDI.
This guidance is intended to outline principles for how trustees should approach EDI issues, and practical ideas about how to implement them. We hope and expect that our collective understanding of these issues will broaden and deepen over time, and new ideas and other examples of good practice will emerge. We may well build on this guidance in the future.
The governing body
When we describe governing bodies, we include trustees and directors (where the trustee is a company) of occupational defined contribution (DC), master trusts, defined benefit (DB) and hybrid pension schemes, as well as scheme managers and pension board members of public service pension schemes (board members).
What is equality, diversity and inclusion?
Equality, diversity and inclusion are interlinked. Having people with different life experiences might mean that a governing body is more ‘diverse’, but if those people are not and do not feel respected (unequal) or heard (where inclusion is lacking), then the governing body will not benefit from the full talents and experiences of those people.
When considering equality, diversity and inclusion and what they mean for pension scheme savers and governing bodies, we would encourage employers, governing bodies and those with the power to appoint trustees to master trusts to look both to and beyond characteristics protected by law.
Equality
According to the Equality and Human Rights Commission, “equality is about ensuring that every individual has an equal opportunity to make the most of their lives and talents. It is also the belief that no one should have poorer life chances because of the way they were born, where they come from, what they believe, or whether they have a disability. Equality recognises that historically certain groups of people with protected characteristics such as race, disability, sex and sexual orientation have experienced discrimination".
This guidance focuses on ways of improving diversity and enhancing the inclusion of governing body members. Because governing bodies take decisions by voting (usually requiring a simple majority, sometimes with the chair having a casting vote in the event of a tie-break), we believe that improving diversity and inclusion should improve equality.
Diversity
There can be many ‘forms’ of diversity, which capture a wide variety of individual differences, that may not be immediately apparent when we first meet someone. When describing diversity, we have adopted the definition used by Pensions and Lifetime Savings Association (PLSA) (PDF 1.18 MB, 24 pages), which is broader than the Equality Act protected characteristics and encompasses a wider range of individual differences, for instance, socio-economic, educational history and accents.
We are also aware that our experiences of diversity are likely to be influenced by a multitude of factors. Each of us has some protected or other characteristics resulting in us having more than one ‘identity’, some of which we may share with others. The individual combination of characteristics may mean that our life experiences are different from others. Acknowledging this may help to identify and address the multiple levels at which discrimination and inequalities are experienced.
Inclusion
Inclusion means the effective involvement of all individuals, creating an environment in which they can thrive and reach their full potential. In an inclusive environment, diverse characteristics are harnessed in a way which is mutually beneficial to individuals and organisations, enabling the best decisions to be made.
Why EDI is important for pension schemes
The introduction of automatic enrolment has seen a dramatic change in the pensions industry. It has meant that more people than ever before are saving into a workplace pension. There has never been a more important time for pension schemes to be well-run, with good governance and decision-making, in the best interests of savers.
We want to enhance and protect the outcome for all savers, so that together with our regulated community, we can build a workplace pensions system that works for everyone. Supporting EDI on scheme governing bodies (including sub-committees) is key to achieving these goals.
The benefits of improving EDI for governing bodies
There have been studies which show that diverse groups of people make better decisions where there is equality and inclusion.[1]
We believe that the benefits of diverse and inclusive pension governing bodies made up of people who have a broad range of characteristics, life experiences, expertise, and skills will lead to:
- wide discussion encouraging new thinking and approaches
- more effective decision-making that reflects member needs and values
- improved value for money for savers
- deeper understanding of issues that have a real-life influence on savers’ outcomes
- better decision-making that impacts quality of life for a wide range of individuals
- greater understanding, insight and empathy for scheme beneficiaries on things like discretionary death benefits and ill health decisions
- improved communications with scheme members
Footnote for this section
- [1] For example: Scott E Page, The Diversity Bonus, 2017, Embracing Diversity And Fostering Inclusion Is Good For Your Business (forbes.com).
Diversity and Fairness in the Jury System (PDF 1.95MB, 244 pages) (ucl.ac.uk).
Barriers to diverse governing bodies
Scheme type, size and sector may all pose different challenges to achieving EDI. There are quick and easy steps that some schemes can and should take to improve EDI now. We recognise that other steps to realise EDI ambitions may need to be a medium to long-term aspiration for schemes. Being aware of the potential barriers to EDI can help you understand the needs of your scheme and inform your EDI objectives.
Some barriers to achieving diversity include:
- employers in a sector with a non-diverse workforce – for example, mainly made up of a particular gender
- not attracting interest from a diverse group of candidates for roles on the governing body
- limited time or resources – particularly for smaller schemes
- requirements for governing bodies to include members from certain cohorts – for example, member-nominated or employer-appointed
- existing trustees remaining in post
- understanding what is meant by diversity and inclusion
- perceptions that potential candidates have of governing bodies
- how governing bodies operate – for example, structure, timing and format of meetings
We explore practical solutions to these barriers in our EDI guidance for governing bodies. We also cover key matters for employers to consider in our EDI guidance for employers.