Kim Kaveh speaks to three trustees under the age of 30 about harnessing the power of generational diversity on boards.
VIDEO: Three young trustees talk about their role
The diversity of pension fund trustee boards has been on the radar for some time. Last year, the Pensions and Lifetime Savings Association embarked on a campaign to improve the diversity of trustee boards in a climate of "division and disharmony". Meanwhile, The Pensions Regulator has promised this is an area it could "increasingly dig into".
But why is diversity important? Having a diverse trustee board is increasingly believed to be a key driver of a board's ability to govern properly, make effective decisions and protect member interests. It includes - but is not limited to - varied political beliefs, genders, ethnicities, educational and socioeconomic backgrounds, sexual orientations and geographic locations.
But true diversity also encompasses the age of trustees.
Indeed, some boards are finally waking up to realise the power of having younger pools of talent in the meeting room - to challenge perceptions, broaden ambitions, and bring different outlooks to the table.
Speaking exclusively to Professional Pensions, local government trustee Lorna Russell - 29, member-nominated trustee (MNT) Anna Darnley - 25, and MNT Jens van Egmond - 30, talk about how boards can reap the benefits of generational diversity.
All agree that younger trustees can make a positive contribution to a board.
It brings a "dynamic energy that might not otherwise have been there", says Russell, an account director at Lansons who became a member of the London Borough of Camden's pension committee at the age of 25.
She believes it does not necessarily follow that if you are young, you do not have experience.
"It is important to make sure that younger trustees are representing our younger members. For example, I am not afraid to ask questions which might sound ‘stupid'.
"I think some of the older and more experienced trustees might be afraid to ask those questions. It's about making sure every decision I make is in the interest of the members; acting with integrity, responsibly, and prudently."
Meanwhile Darnley, who became a trustee for the Accenture Retirement Savings Plan at the age of 24, describes how her personal experiences on the board have led to a positive change in member outcomes.
"I have had situations where my opinion has differed from others on the board, which has resulted in a rich discussion on how we make decisions - both in cases of specific members, but also more broadly when we're talking about communication as a whole."
The trustee - who is also a design lead at Accenture's innovation centre - says that although she did not have pensions experience before she took on the role, this is not essential to become a trustee. "I work a lot around user experience and design so I have no contact with pensions whatsoever.
"I think what is incredibly important is a willingness and an interest to learn" - Anna Darnley, Accenture Retirement Savings Plan
Van Egmond - who became a trustee at the age of 27 - agrees, noting that just because a trustee has "not seen it all, it does not mean they cannot make a positive contribution".
Van Egmond is a trustee at Sportfondsen Pension Fund - a Dutch company that operates more than 200 swimming pools on behalf of city councils.
Although he has gained pensions knowledge and experience, working as a defined contribution manager at Cardano, he adds: "I think for all trustees including the younger ones, there should be some room to learn from fellow peers."
But as well as acting in the interest of members, the experience which the trustees have gained in their role is incredibly valuable to them.
Russell says working in financial services means she gets to work with asset managers and pension funds from the other side - so representing them, and lobbying government on their behalf.
"But actually, flipping it over, [as a trustee] I get the chance to grill them about why they're not providing enough benefits for our members; a really interesting experience that has helped me in my career."
And, although being a trustee is a big responsibility, the best thing is when the work is done well and people are grateful. Van Egmond provides an example: "The retirees of the pension fund I work with have really thanked the board for doing a good job over the past couple of years. They got their pensions partially increased in line with inflation. Not all funds had that."
So, moving forward, what can be done to encourage more boards to take younger people on as trustees?
In the Netherlands every board is required by the Dutch pension fund code to have at least one trustee below the age of 40.
Van Egmond explains: "That is a very noble goal to strive for and, if you commit to that goal and actively recruit young members, then I think that should do the trick."
But boards must also take action themselves, by being active, and speaking to younger generations at various events or in the workplace - a sentiment with which Russell strongly agrees.
"I don't think the local government schemes have a particular problem because by virtue by the fact that we're councillors. And there are quite a lot of young councillors in London particularly.
"However, more broadly, there is a lot more work that needs to be done to either nurture young trustees to come forward or to broaden out the recruitment process."
But it is not just generational diversity that is a problem on boards and the three trustees also recognise the wider issues of gender, race, disability and class diversity.
Russell says: "I think a lot more needs to be done and I wouldn't take generational diversity as a standalone topic.
"They should make sure they are following Equality and Human Rights Commission standards to make sure they have a code of conduct for diversity. They also need to make sure that they have an accountability for diversity, and find the right people. I would encourage them all to look at their own recruitment processes."
There are also other forms of cognitive diversity - such as the diversity of thought and opinion - that we really need to start talking about as well, according to Darnley.
"From a generational perspective there is an onus on those involved with pension schemes to go out and to talk to people in their business to ensure people do understand what the offering is, and to understand what pensions are. And it comes back to the real lack of financial education that we have."
She adds that there is a real opportunity to go out and engage with younger people and start a dialogue.
"If that dialogue gets going - explaining the reason pensions are important, why they matter, and the impact it will have on their quality of life later on - people will be interested."
But the key is to do it in a way that isn't patronising.
"It should not come from a place that says 'I have 40 years' experience' and 'you know nothing and I'm going to tell you what to do'," adds Darnley.
She concludes: "I think the key is going to the table and saying this stuff is really serious, and this will impact you, your quality of life, and your family's quality of life - let's have a conversation."
So what lessons can boards take from our young trustees? If pension fund trustee boards harness the power of generational diversity, it will lead to better decision making and ultimately, improve member outcomes.
Are you a trustee aged under 35? Join Professional Pensions' young trustees group by emailing Kim Kaveh at [email protected]
This week’s top stories included Aon findings that the number of defined benefit schemes employing a sole trustee model is expected to double by 2025, while Scottish Widows invested £2bn as the inaugural investor in BlackRock’s new climate fund.
Standard Life Aberdeen (SLA) saw its profits fall by a third in its first-half results as revenue fell, but redemptions from its strategies fell to the lowest level since the firm's blockbuster 2017 merger.
Phoenix Group has reported a £36m increase in group operating profit in the first six months of this year, as well as strong cash generation of £433m.
Aviva’s operating profit fell by 11% in the first half of the year as Covid-19 hit business activity, although a growth in bulk annuity sales partially offset the drop.
Coronavirus Blog: Scottish Widows extends easing of annuities applications; How to build cashflow strategies amid the pandemic
In this live blog, Professional Pensions brings together all the latest news on the industry's response to the coronavirus pandemic, as well as regulatory and legal updates.