Message from UN Participant Representatives to the Pension Fund, 10 July 2017

MESSAGE FROM UN PARTICIPANT REPRESENTATIVES TO THE PENSION FUND/MESSAGE DES REPRESENTANTS DES PARTICIPANTS DE L'ONU AU FONDS DE PENSION

BROADCAST UNHQ
Date: 10 July 2017 at 10:21:18 PM

Subject: Message from UN participant representatives to the Pension Fund / Message des représentants des participants de l'ONU au Fonds de Pension
Reply-To: "Ian Richards" <Ian.Richards@unctad.org>

Dear UN Colleagues,

As representatives of UN staff to the pension fund, elected by you in April, we would like to update you on preparations for the forthcoming annual board meeting, which takes place 24 to 28 July in Vienna.

Issues to which we are devoting particular attention are: the large backlog of payment delays to retirees; proposals to increase the top-heavy nature of the pension fund administrative budget; the need for proposals to speed up the first payment upon retirement; investment underperformance; and in the context of the above, the proposals to renew the current leadership.

However, our work has been severely hampered by the fact that important documents, some running to over 200 pages, have been shared very late and well past the six-week deadline. And some have yet to be shared.

We are also concerned by a statement made by the fund CEO, Sergio Arvizu, to a meeting of New York-based retirees, in which he heavily emphasized the trend of pension funds ceasing to provide a pension linked to length of service and final salary, without closing the possibility of this happening at the UN. We are worried about this development and believe the closing of our unique defined benefit scheme would signal a major abrogation of responsibility by the employer and a significant cut to the UN’s social security provision. We will be seeking further clarification on this matter very shortly.

Finally we are contesting the decision of the CEO to block the presence of two UN participant representatives among us at the board’s meeting. We continue to believe that excluding elected members from the board violates due process, results in the disenfranchisement of over 86,000 participants and removes the ability of staff to scrutinize and have a say in their own pension fund as was the intention of the General Assembly when it established the tripartite board.

We will continue to keep you updated as we approach the board. In the meantime we encourage you to read this informative open letter below (English only) written to the Chair of the board.

Thank you,

Mary Abu Rakabeh
Ibrahima Faye
Aissatou Ndeye Ndiaye
Bernadette Nyiratunga
Ian Richards
Michelle Rockcliffe

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Chères et chers collègues à l'ONU,

En notre qualité de Représentants des participants de l'ONU au Fonds de Pension, élus par vous en Avril dernier, nous souhaitons vous informer sur les préparatifs de la prochaine réunion annuelle du conseil d'administration qui aura lieu du 24 au 28 juillet à Vienne.

Les problèmes auxquels nous accordons une attention particulière sont les suivants: l'arriéré important des retards de paiement aux retraités; Propositions visant à accroître le budget administratif du Fonds de Pension; La nécessité de mise en place de propositions visant à accélérer le premier versement de pension à la retraite; Sous-performance de l'investissement; et des propositions pour renouveler le leadership actuel.

Cependant, notre travail a été gravement entravé par le fait que des documents importants, dont certains comptent plus de 200 pages, ont été partagés très tardivement et bien après le délai de six semaines requis. Et certains document n’ont meme pas encore été partagés jusqu’à ce jour.

Nous sommes également préoccupés par une déclaration faite par le chef de la direction du fonds, Sergio Arvizu, à une réunion des retraités à New York, dans laquelle il a fortement souligné que le fonds de pension cesserait de fournir une pension liée à votre durée de service et au salaire final, tout en n'excluant pas la possibilité que cela se produise également à l'ONU. Nous sommes préoccupés par ce développement et nous croyons que la fermeture de notre régime unique de prestations définies signifierait une abrogation majeure de la responsabilité de l'employeur et une réduction importante de la provision pour la sécurité sociale de l'ONU. Nous essayerons d’obtenir d'autres précisions sur cette question très prochainement.

Enfin, nous contestons la décision du chef de la direction d’interdire la présence de deux de nos représentants des Participants des Nations Unies lors de la réunion du conseil d'administration. Nous continuons de croire que l'exclusion des membres élus du conseil constitue une violation grave de la procédure régulière qui entraîne la privation de droits de plus de 86 000 participants et supprime la capacité du personnel à examiner et à avoir son mot à dire dans sa propre caisse de retraite, comme l'avait prévu l’Assemblée Générale lors de la création du conseil d'administration tripartite.

Nous continuerons de vous tenir au courant de l'approche du conseil d'administration. En attendant, nous vous encourageons à lire cette lettre ouverte informative ci-dessous (en anglais seulement) écrite au président du conseil d'administration.

Merci,

Mary Abu Rakabeh
Ibrahima Faye
Aissatou Ndeye Ndiaye
Bernadette Nyiratunga
Ian Richards
Michelle Rockcliffe

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Open letter to Mr. Vladimir Yossifov
Chairman of the United Nations Joint Staff Pension Board
7 July 2017

Dear Mr. Yossifov,

Subject: Matters of concern before the upcoming Pension Board meeting, 24-28 July 2017, Vienna

With regard to the annual Pension Board meeting, which will take place in Vienna from 24 to 28 July 2017, while we are not privy to the Board’s agenda, we understand that several important topics will be before the Board for discussion.

Specifically, the issues of investment underperformance and the unprecedented backlog in benefit payments, as variously detailed in General Assembly resolution 71/265, Board of Auditors report A/71/5 Add 16, Advisory Committee on Administrative and Budgetary Questions (ACABQ) report A/71/621, Pension Board report A/71/9, and Office of Internal Oversight Services (OIOS) audit 2017/2, are among the issues requiring the Board’s attention.

In this connection, we are concerned about divergent messages in the statements of the Fund’s Chief Executive Officer, Sergio Arvizu, and the Representative of the Secretary-General for Investments, Carol Boykin, at the annual assembly of the Association of Former International Civil Servants/New York (AFICS/NY), held on 27 June 2017. A video of the meeting is available here for your ease of reference:
http://webtv.un.org/…/association-of-former-…/5485264583001…

Strangely, investment performance was one of the primary topics of Mr. Arvizu’s presentation, although it does not fall under his area of responsibility. The fund is increasingly dependent on investments to remain solvent, he noted. In this connection, he said, many large organizations, including the World Bank, have moved away from the defined benefit model (the UN pension fund model), where the employer takes all the risks, to the defined contribution model, where the employer transfers all the risks to the employee. Mr. Arvizu’s reference to this issue is curious, indeed.

Any such move in that direction would fundamentally change the purpose of the UN Pension Fund: the social security of United Nations employees worldwide. These provocative and troubling speculations by Mr. Arvizu undermine staff confidence and invoke longstanding concerns of the UN staff federations and others, about his past moves to consolidate and privatize the fund.

Regarding the backlog in pension payments, once again Mr. Arvizu’s focus was exclusively on “actionable” cases. He noted in this regard: “We’re addressing all of the straightforward cases within the same month, and the remaining balance is less than one week, or one week, and we follow the industry practice of 80-20”.

Absent from his presentation was any mention of the thousands of pending cases of other types, as detailed in the audit of the Office of Internal Oversight Services mentioned above. How can Mr. Arvizu be expected to address a problem he is unwilling to even acknowledge?
Ms. Boykin presented a Power Point array of investment charts, in dazzling detail, “in the spirit of continual improvement in transparency”, noting in this regard: “We have had a lot of questions about the performance of the fund, and we’ve heard people saying that we’re underperforming. We’re not underperforming.”

Ms. Boykin’s characterization of concerns about the fund’s investment underperformance as “people saying we’re underperforming” seems oblivious to the fact that these views were expressed by major UN bodies (the General Assembly, the Pension Board, the ACABQ, the Assets and Liabilities Monitoring Committee), not just “people saying.”

While Ms. Boykin acknowledged in her statement that the Fund underperformed in investments in 2016, it is documented in the reports of these major UN bodies that the Fund also underperformed in the 2014-2015 biennium.
Further, and contrary to Ms. Boykin’s statement that “in Q1 2017 we were right on top of our benchmark. . . So we’re right in line with the benchmark this year”, according to the Fund’s publicly available investment report for May 2017, the Fund returned 8.24 per cent while the policy benchmark returned 8.51 per cent, i.e, the Fund underperformed by 0.27 per cent. (See May 31, 2017 monthly report here):http://imd.unjspf.org/monthlyreports/May-2017.pdf. How can Ms. Boykin be expected to address a problem she’s unwilling to even acknowledge?

On a more realistic note, we were gratified that the Chef de Cabinet, Ms. Maria Luiza Ribeiro Viotti, noted that the “Secretary-General is aware of your concerns” and that “The Pension Fund’s backlog of actionable cases and management issues has caused hardships for thousands of employees.” Further, she said, while progress had been made on actionable cases, “there are still other pending cases related to deferred pensions, special and recalculation cases, as well as non-actionable cases pending receipt of additional information.”

Ms. Ribeiro Viotti also provided a welcome reality check on investments, noting that the Secretary-General, who “has a fiduciary responsibility, is looking forward to the board’s consideration” of “a review of the fund’s investment practices, risk management and investment performance conducted by an independent third party.

In this regard, we were also gratified to hear from Warren Sach, chair of the AFICS/NY pension committee and Federation of Association of International Civil Servants (FAFICS) representative to the Board, that “pension delays are unacceptable” and that the Board will “spend considerable time” on the issues of the backlog in pension payments and the independent third-party review. Investment underperformance in 2016, he noted, “means that the value of assets of the fund as at year end 2016 were nearly $1 billion or $937 million below what they would have been if the Pension Fund portfolio performed as well as the market as measured by the policy benchmark.” (If one adds underperformance of $147 million up to May 2017, in less than eighteen months, the Fund has underperformed by $1.084 billion.)

Of particular significance was Mr. Sach’s statement (quote): “Do not be misled into thinking that mere growth in assets of the Fund to new highs in billions of dollars means that investments are performing optimally. It is performance relative to the market that matters.”
We are not misled on the topic of the Fund’s investment underperformance. We also do not believe that this underperformance is owed to the “market favoring indexation over active management” as Mr. Boykin contends.

Neither are we misled on the issue of the backlog in pension payments. While we note Mr. Arvizu’s claim, and Mr. Sach’s resolve to support his request for more resources, we do not believe that the backlog in pension benefits or issues with client services can be solved by additional resources alone. The OIOS audit points squarely to managerial deficiencies in the Fund Secretariat and there is no clear indication that these have been resolved.

Finally, we wish to state our concern about your active support of Mr. Arvizu in blocking two duly elected participant representatives to the UN Staff Pension Committee from participating in the Board, despite assurances that arrangements could be made to avoid potential conflicts of interest. This, unfortunately, echoes the Board’s reported muzzling of the UN staff federations at last year’s board meeting, and continues to cause us serious concern about the fairness and objectivity of the Board’s proceedings.

There are grave matters before the Board that will affect the future of our Fund, including decisions about changes to its leadership moving forward. We urge you to eschew partisanship for leadership on decisions that will ensure that our Fund continues on a healthy track for the benefit of both current and future beneficiaries.

Yours sincerely,

Lowell Flanders
Loraine Rickard-Martin
Beneficiaries/UNJSPF

c.c.
Maria Luiza Ribeiro Viotti
Jan Beagle
Sergio Arvizu
Carol Boykin
Ian Richards
Diab El-Tabari
Dimitri Samaras
Stephen Towler
UNJSPF Board representatives
FAFICS members
AFICS/NY Governing Board members