We need diversity to tackle the problems of today and the uncertainty of tomorrow. Data has continually proven that there is a business case for increasing diversity across the talent pipeline. For example, in a report by McKinsey, companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians and for gender diversity, companies in the top quartile have 15% higher returns. This results from ethically- and gender- diverse teams offering companies innovative solutions, broader thinking, and new ideas stemming from unique experiences that allow them to challenge their counterparts, which encourages deep inquiry and breakthroughs.

Nevertheless, the face of power has remained the same in industries, particularly in trustee boards, though the face of our cities and the requirements of scheme members is constantly changing. Research indicates that 83% of scheme trustees are male, and only 5% of trustee boards have more than 50% female trustees. Comparatively, FTSE 100 boards have 32.1% female representation, and 7.4% POC board members – 3.3% of which are in the most senior positions of Chair. Interestingly, this comparison highlights the slow progress trustee boards have made in regards to diversification compared to FTSE 100 boards, many of whom are sponsoring employers of occupational pension schemes.

However, the overarching benefit of diversifying trustee boards is not as economically driven as my first paragraph may lead to believe. Trustee boards have a responsibility to look after the retirement savings of scheme members and, with this responsibility, they have a duty to cogitate numerous factors when making decisions – more so recently with auto enrolment leading to an increased number of people saving towards their retirement. If the demographic of the trustee board is the same, can it be said that they are making the best possible decisions for their members when their ideals may also mirror? The need for diversity rather than homogeneity is further emphasised by a study which found that ‘56% of leaders do not value ideas that they do not personally see a need for.’ The concept of intersectionality highlights that each individual brings forth their own set of cognitive, characteristic, and experiential diversity, so a diverse board will enable trustees to perform their duties to a higher standard as more factors (age, race, gender, religion etc.) are taken into account. This will fill in potential knowledge gaps previously present when trustees were making decisions on savers outcomes, which is beneficial as fundamentally better decisions lead to better member outcomes.

The underlying question is how do we go from talking about diversity to making it happen? The Pensions Regulator (TPR) is exemplar in illustrating this. In 2019, TPR highlighted the significant correlation between ‘diversity and inclusion (D&I), good governance, and the proper performance of a trustee board’s legal duties.’ TPR have since implemented measures to monitor and improve their own level of diversity through various streams, such as setting up employee network groups, an EDI committee, and reviewing and enhancing their recruitment process (more information on TPR’s strategy can be found here.) I believe TPR’s roadmap to change is paradigm for trustee boards and the next generation of pension professionals as recognisably TPR, through their strategy, are holding themselves accountable. They are setting benchmarks, aiming to achieve charters, acknowledging that D&I is a journey not just a problem that will solve itself, whilst also recognising D&I is not an agenda that can be treated as a tick box exercise. Recognition, accountability, and active monitoring are the preliminary and continuous steps the next generation of pension professionals need to take to improve diversity in the industry, as without these qualities change will fail to materialise regardless of how exhaustive D&I lists are.

Overall, diversity does have a positive effect. Implementing measures is not just a ploy of political correctness – it is a necessity. In our increasingly interconnected world, we need boards that reflect society, whose ideas reflect those of their members, ideas and advice that acts in savers best interests – not just the interest of one branch of society. This can only be achieved through diversification. Trustee boards and governance bodies, who recognise this will benefit.