New Mallowstreet research commissioned by Cardano, the pensions advisory and investment management specialist, has revealed that Professional Trustee (‘PT’) firms are playing a critical ‘catalysing’ role improving diversity, equality, and inclusion (DEI) in UK pension scheme boards.

The research, which surveyed over 100 pension trustees, showed that on the whole pension trustee boards remain overwhelmingly male, over the age of 45, and with a tertiary education. 75% of respondents sit on boards where over 60% of members are male, while 2 in 5 sit on boards where half the board are 46-60 years old. On top of this, 70% say that four out of every five board members have tertiary education (e.g. university).  

Professional trustee services firms leading the way

In contrast to traditional pension scheme boards, the research found that PT firms appear generally more diverse, particularly in terms of age and gender. Over a third of PT firms (36%) report that more than 40% of their trustees are female. A quarter of schemes with professional trustees say the same, highlighting that professional trustees are helping the schemes they work with increase diverse representation. PT firms also have better age diversity than scheme boards, with one in five reporting that over 40% of board members are below the age of 45.

PT firms are also driving DEI training and implementing zero tolerance policies. Over half of PT firms (54%) have conducted or are planning to arrange diversity and inclusion training as part of their efforts to improve DEI, while 38% have established a formal zero-tolerance policy for harassment or bullying.

Darren Redmayne, CEO, Cardano Advisory, commented: “Professional trustee firms are playing a valuable role in helping the industry progress on DEI issues. As the Pensions Regulator works through its DEI action plan this year, we believe trustees are a key stakeholder group for the industry to partner with to further improve DEI on pension scheme boards.

“Positively, our research also shows that there is a willingness to embrace DEI with a confident belief that improving DEI is beneficial not just for trustees, but important for delivering better outcomes for pension savers too through more robust decision-making accessing wider perspectives.”

Need to overcome data and benchmarks challenges

However, the survey also highlighted that 58% think that DEI is low priority compared to other governance issues. 42% attributed it to the failure of attracting diverse talent and 30% to the risk of virtue signalling or DEI becoming a box-ticking exercise. Collecting and storing DEI data and which benchmarks to follow were also challenges identified. 68% of respondents also do not follow any major DEI standards.

This is all despite 63% recognising that DEI is a useful way to broaden a team’s skill sets as well as improve governance and decision-making for better member outcomes.

Joanne Segars, Chair of the Board of Trustees, NOW: Pensions, said: “The pension industry is in a very different place to where it was when I first joined 30 years ago. The industry has seen an increasing number of women entering the profession, which is fantastic, but we still have some way to go regarding gender, age, ethnicity and socio-economic background. I hope by being one of the (still too few) female chairs in our sector, I can continue to challenge the status quo and inspire more women to become trustees. More diverse boards lead to better governance and, in turn, better outcomes for members. Adopting clear policies and monitoring will help achieve better diversity. We all have an important role to play in driving the discussion – and action – on the ways in which we can overcome the challenges and barriers to greater diversity in pensions.” 

Gillie Tomlinson, Head of Trustee Engagement, Cardano, said: “While this data might not be surprising, lots of pension trustee boards, particularly those with professional trustees in place, are keen to make meaningful, positive changes to drive the industry forwards. As well as bringing technical capabilities, many professional trustee firms are using their board appointments to bring, and push for, DEI improvements.

“It is crucial that firms and schemes continue to attract diverse talent to develop best practice DEI policies from the ground up, to prevent lack of representation from being a barrier to change. The industry must work together and challenge how we can improve the attractiveness for people from diverse backgrounds to become both professional and lay pension trustees.”