Six impossible things before breakfast
Lesley Williams, chair of the Pensions and Lifetime Savings Association, imagines true diversity in pensions
“Sometimes I’ve believed as many as six impossible things before breakfast,” said the White Queen to Alice.
And sometimes I wish I could!
Imagine waking up to a world where pension scheme governance is used as an example of excellence, complete with a diverse pool of potential trustees and expertise that spans the full range of necessary skills to deliver exemplary governance. These three things seem near impossible today.
Now, imagine those governing pension schemes using their resource and expertise not only to shape and execute the scheme’s strategy, but also to bargain harder with suppliers, reaping financial gains for the scheme and its members. By my reckoning that makes six – the list is building. Some schemes are already doing these things – which tells us they are not impossible. But many schemes, especially smaller ones, are finding it impossible to do all of them. Why does this matter? Well, good governance matters. It is recognised as the foundation of success for companies. Pension schemes should be no different.
UK schemes represent £1.8trn, often outstripping the value of some of the largest plcs. Running a scheme has become more complex and now has a public profile because these schemes provide benefits for millions of people. Those benefits most obviously apply to those people receiving a pension from those schemes. But without schemes supporting retired members, those still in work would bear a heavier financial burden in providing for older generations.
So the governance of pension schemes is just too important to ignore. As the bar has risen on standards of governance within companies, so too should the governance bar be raised for pension schemes.
Imagine waking up to a world where pension scheme governance is used as an example of excellence, complete with a diverse pool of potential trustees and expertise.
The variety of expertise required to run a scheme effectively includes knowledge of investments, law, actuarial science, finance and pensions, of course, but also an aptitude for communication, negotiating skills and commercial agility. That is quite a diverse mix. Having identified their skill requirements, the best corporate boards will try to ensure that they represent a diversity of socioeconomic groups and gender.
At the Pensions and Lifetime Savings Association (PLSA), we started to explore the issue of diversity in our 2016 annual survey by looking at gender. The average scheme was made up of 17% women and 83% men. Only 5% of trustee boards are evenly split by gender or have more female than male trustees. I think we can safely assume that other markers of diversity, such as race and sexuality, are similarly off kilter when it comes to representation on trustee boards. Diversity results in better decision making, better understanding and better communications. If we all actively seek ways to increase the diversity of the people who want to be trustees, we would be well on the way.
Diversity does not happen without help. How about considering the way you word adverts and role descriptions – where do you put them and who would they appeal to? Do you have a selection rather than an election process, so that you can drive some diversity? Do you insist that your shortlist contains diverse people? Have you considered your succession planning and pre-appointment training as a way to bring on people from different groups in society, thereby developing the skills you need in a diverse population? And do you also ask your suppliers and advisers to adopt these approaches?
Perhaps the White Queen has some good advice for us all. When Alice said: “One can’t believe impossible things”, the Queen replied pityingly: “Can’t you? Try again: draw a long breath, and shut your eyes.”