Increased diversity in trustee boards still a primacy for trustee chairs

Barnett Waddingham and Winmark’s latest Pension Chair Remuneration Report found that trustee chairs continue to look for diversity in their trustee boards and 38% said their scheme has already taken steps to increase diversity in the past year (a similar proportion to last year 40%).

The majority of respondents agreed that trusteeship is not diverse enough in terms of specific demographic criteria such as ethnicity (61%) and age (57%). Around half (47%) agree that trusteeship is not diverse enough in terms of gender and 77% say trusteeship insufficiently represents at least one of these groups.

Although diversity is still a priority for trustee chairs, as almost half (45%) agreed that effectiveness of the trustee board would be improved if it was more diverse, participating schemes report females make up only 24% and black and minority ethnic trustees make up just 3% of trustee boards. This shows there is certainly scope to increase representation.

Consistently, respondents have said that a lack of candidates is the top barrier to increasing diversity, and this year is no different, 80% cite a recruitment related barrier in the search for diversity, a third (33%) state the profile of scheme membership being the most common barrier. Others include low turnover in trustees (9%) as well as a lack of candidates who are interested (12%).

One positive step is that 45% have said they would consider (19%), are already planning (15%) or implementing (11%) a review of recruitment screening and search processes, and a similar number (47%) are already implementing or planning to implement a review of the language, style and methodology used in recruitment material.

Remuneration levels

Individual annual remuneration ranges from £6,000 up to £149,000. The median, based on our survey, is £47,000 compared to £47,350 in the previous year. It represents a continued flat-lining of remuneration following a period of consistent increases of around 3.3% per year adjusted for inflation between 2015 and 2018. The data indicates a decrease in remuneration in real terms.

The outlook for remuneration levels for the full year 2021 is the most optimistic it has been for two years, suggesting cautious hope for the start of a post-COVID remuneration rebound. 

41% expect a remuneration increase (up 7% on the previous year), 3% expect a decrease (down 4%) and 56% expect it to remain the same for another year. 

Covid-19 Impact

There is a clear message from survey respondents that the long-term impacts of Covid-19 are expected to be primarily technological and operational rather than related to scheme funding or financial performance.

The large majority (86%) expect Covid will ‘definitely’ or is ‘likely’ to result in acceleration of technology adoption by schemes and a similar number (84%) anticipate permanent adoption of a virtual format for at least some Trustee meetings. 64% also expect increased cybersecurity threats due to hybrid working models.

Top Priorities

As we start to emerge from the challenging and demanding pandemic, schemes are making significant changes to their top priorities. As they look beyond the immediate funding and operational challenges schemes have said their top priorities for the next two to three years include keeping abreast of regulatory demands (83% up from 68% last year), ESG investment issues (75% up from 59%), whilst endgame planning remains a priority (staying relatively steady at 74%). 

Sonia Kataora, Partner at Barnett Waddingham, said: “Although trustee boards have limited diversity across age, gender and ethnicity, the majority of trustee chairs are not unaware. Nearly all specific steps schemes have taken to increase diversity seek to address the primary challenge of recruitment and many are already implementing methods in order to increase representation across all demographics.

“It is also recognised that diversity in the board room should also encompass experience, skills, backgrounds and perspectives. All of these, including demographics, will contribute to the quality and value of boardroom discussions and debate. In order to increase the diversity of applicants, trustee chairs need to review their application process to gain greater interest and engagement from a wider talent pool.”

John Madden, Research Director at Winmark, said: “There is a growing feeling amongst Pension Chairs that their remuneration is not keeping pace with the challenges they face. One in six now say they don’t have enough time to adequately fulfil the demands of the role, up from just one in twenty in 2019. If a hoped for rebound in remuneration levels occurs this year, it will be interesting to see if this perception persists 

"The increasing complexity of Chair and Trustee roles also makes recruitment more challenging. It is good to see that many schemes are reviewing their recruitment processes and approaches, particularly as 80% of schemes identify recruitment difficulties as the main barrier to improving scheme diversity.”