1. It has
not been normal practice for the Pension Board to issue a Communique at the
conclusion of its annual session. However, with information on matters
considered by the Board not being generally available until the release of the
Sessional Report and the Report to the General Assembly, some two months after
the Board, and the need of Board Members to report to their constituents in a
timely manner, this Communique is being issued.
2. The 65th meeting of the UN Joint Staff Pension Board
(the Board) took place at the premises of the Food and Agricultural
Organization of the United Nations (FAO) in Rome, Italy, from 26 July through 3
August 2018.
3. MATURITY: The Fund was established almost 70 years ago and
presented its first financial statements in 1949. It has all the features of a
mature defined benefit plan. The Board is confident that the Fund is
actuarially and financially sound. The current strong situation is due largely
to the initiatives developed by the Board’s 2013 Working Group on
sustainability, endorsed by the Board and approved by the General Assembly,
together with prudent management practices of the past.
4. INVESTMENT PERFORMANCE: At 31 December 2017, investments of the Fund managed
by the Fund’s Office of Investment Management (previously IMD) were valued at US$64.1
billion (2016: US$54.4 billion). On the back of strong markets, the
portfolio achieved a nominal investment return of 18.6%, compared to the
Board’s 18.1% policy benchmark. Real investment returns meet or exceed the
long-term real rate of return of 3.5% actuarially-required to ensure the
Fund’s long-term solvency. As required by the General Assembly, the principles
of the Fund’s investment management strategy continue to be safety,
profitability, liquidity and convertibility.
5. ACTUARIAL BALANCE: The actuarial valuation as of 31 December 2017
indicated a small actuarial deficit of 0.05% of pensionable
remuneration. As noted by the pro-bono Committee of Actuaries, this is
the second consecutive actuarial valuation (31 December 2015: 0.16% surplus)
in which the Fund remains very close to actuarial balance. Given margins of
error and assumptions in actuarial valuations, these results are substantively
in balance. This is what the Board aspires to; since 2003, all actuarial valuations
have remained within the margins approved by the Board of plus or minus 2% of
pensionable remuneration from the point of actuarial balance. The Board’s Assets
and Liabilities Monitoring Committee confirmed that the Fund continues to
be well-funded.
6. NO ROOM FOR COMPLACENCY: The actuarial valuation was underpinned by the very
strong 2017 investment returns and greatly increased value of the Fund’s
investment portfolio, but also by actuarial assumptions predicated on a 0.5%
annual growth in contributing participants. That exceptional 2017
investment return is unlikely to be repeated consistently in the medium-term.
Reported participant numbers actually fell 1.2% in 2017; they may not
grow going forward. Actuarial assumptions must be constantly validated. The
Board remains alert to ways to mitigate the fall in contributing participants
and the declining ratio of participants to beneficiaries.
7. FINANCIAL POSITION: The Board’s Audit Committee noted that the Fund
is in a stable financial and operational position. This is the sixth year in
which the Fund has presented annual financial statements under
globally-recognized International Public Sector Accounting Standards. The United
Nations Board of Auditors expressed an unqualified (clean) audit opinion on
these financial statements.
8. EXCESS OF BENEFITS OVER
CONTRIBUTIONS: An unqualified audit
opinion, in essence, provides assurance of no material misstatement in the
financial statements, and that the financial statements fairly present the
financial situation. That liabilities side of the financial situation shows
that benefit expenses of US$2.673 billion exceed contributions received
by US$272 million in 2017 (2016: US$233 million). This is a
normal feature of a mature fund, whereby investment returns subsidize the
increasing deficit resulting from an increased number of retirees. It is not a
cause for immediate concern. Nevertheless, as with the decline in active
participants (i.e. the number of staff members actively paying into the Fund),
from which contributions come, the Board remains alert to ways to mitigate this
situation. Board Communique: 65th Session
of United Nations Joint Staff Pension Board Page 2 of 3
9. BENEFIT
PROCESSING AND IPAS IMPLEMENTATION: As is well-known, following the cutover to the Fund’s new
enterprise resource planning (ERP) system, IPAS (Integrated Pension
Administration System), on 3 August 2015, a processing backlog for new
separations and survivors and dependents awards emerged. This was because of (a)
several pre-cutover ‘blackout’ periods required as part of prudent parallel
testing to ensure no interruption in payments to those already receiving
benefits; (b) post-implementation issues typical of most large ERP
implementations; and (c) issues with the UN’s own new Umoja ERP.
The Fund also did not mitigate these delays nor communicate effectively with
those affected. However, at peak backlog, about 98.5% of all periodic
beneficiaries (those already awarded benefits and those with delayed awards)
received their benefits on time.
10. PEAK
AND CLEARANCE OF IPAS-IMPLEMENTATION BACKLOG: This processing backlog for new
awards from 3 August 2015 onwards peaked in the first half of 2016 at the
equivalent of about four months’ caseload. The payment backlogs were
substantially cleared for all primary periodic benefits between late
2016 (for Disability cases) and early 2017 (for others); and for all secondary
periodic benefits except surviving spouses of participants who died in
service by mid-2017. The latter backlog was cleared in the second half of 2017.
The backlog for withdrawal settlements was cleared in mid-2017. A
regular work-in-progress inventory, higher than what is acceptable to the
Board, remains but is being addressing and progressively reduced.
11. IPAS
GOING FORWARD: IPAS
is now operating satisfactorily. There remains room for improvement and it is
being upgraded. The Board regrets sincerely the delays separating participants
and their survivors or dependents experienced but notes the far greater risk of
the collapse of the piecemeal and aged system that IPAS replaced, leaving the
Fund potentially unable to function at all.
12. CLIENT
SERVICE: The Board
welcomed the good progress made in reducing the outstanding number of cases and
the decreased processing time as noted by the UN Board of Auditors. The
year 2017 saw 14,385 awards (2016: 12,322). The Board took note
of various initiatives implemented by the Fund Secretariat to strengthen
benefit processing and client services, further to the end-to-end review
presented to the Board in 2017. Median processing time stands at 11 to 12
working days from receipt of all documents allowing award of a benefit. 62%
of all cases in 2017 were processed within 15 working days of receipt of
complete documents against the target of 75%. More than 80% of all cases
were processed within one month of receipt of complete documents.
13.
GOVERNANCE AUDIT: In
addition to usual governance matters, the Board reviewed a report from the
United Nations Office of Internal Oversight Services (OIOS), which was
requested by the General Assembly to conduct a comprehensive audit of the
governance structure and related processes of the Board. This was considered
in-depth by the Board, convening an in-session working group representative of
the tripartite nature of the Board, as well as the retirees’ representatives,
the Federation of Associations of Former International Civil Servants. This
working group assisted the Board to respond comprehensively to OIOS and each of
the report’s recommendations, in the light of the Fund’s joint and inter-agency
nature and the Board’s earlier considerations of these matters. This in turn
will allow OIOS to consider the Board’s views in its report to the General
Assembly.
14.
REFERRAL TO IAAC: In
view of concerns held by the majority of the Board over the methodology of the
OIOS audit, the Board decided to refer the matter to the General Assembly’s Independent
Audit Advisory Committee (IAAC), which is the body charged with evaluating
the effectiveness of OIOS interventions. The UNSPC Participants’
Representatives – four out of 33 Members - recorded their satisfaction with the
audit and their disagreement with referring this matter to the IAAC.
15. SENIOR
MANAGEMENT AND SUCCESSION: The
Board faced the dual challenge of the extended absence of its Chief Executive
Officer (CEO) and impending retirement, on 31 August 2018, of its Deputy CEO
(DCEO). It decided to recommend to the Secretary-General the appointment of the
current DCEO as Acting CEO from 1 September up to 31 December 2018. At the date
of this Communique, the Secretary-General had accepted that recommendation. The
Board also formed a Succession Planning Committee, the purposes of
which, on an ongoing basis, are to (a) assist the Board to adopt a
long-term strategic approach to succession planning in the senior executive
levels of the Fund; and (b) further strengthen methodologies for their
performance assessment. Taking advantage of this new committee, the Board
requested that it identify a suitable candidate for appointment by the
Secretary-General as Acting Chief Executive Officer from 1 January 2019 for as
long as required. Board
Communique: 65th Session of United Nations Joint Staff
Pension Board Page 3
of 3
16. THE DCEO: Following the current DCEO’s advice
in late 2017 to the Chair of the 64th Board
that he would not seek a second term, the 64th Chair
convened an eight-member inter-constituency DCEO Search Panel (the Panel) to
work intersessionally. The Panel reported its recommendations to the Board. In
view of a number of objections raised by the UNSPC Participants’
Representatives, the Board assessed the procedures applied to establish the
Panel and found them appropriate. It also found the processes and procedures
subsequently followed by the Panel appropriate, noting that it included two
members from the UNSPC (including the Assistant Secretary-General for Human
Resources Management) and that the UNSPC Participants’ Representatives had
declined to be represented on the Panel. The Board, in closed session, interviewed
the candidates put forward by the Panel and proceeded with making a
recommendation to the Secretary-General for the selection of the DCEO.
17. NEW
MEMBER ORGANIZATION: The
Board made an affirmative recommendation to the General Assembly to admit as a
new Member Organization the Preparatory Commission for Comprehensive Nuclear
Test-Ban Treaty Organization, with effect from 1 January 2019. Once
approved by the General Assembly, this will bring the number of contributing
Member Organizations to 24, with beneficiaries from 25 current and past Member
Organizations.
18.
INVESTMENT MANAGEMENT:
The responsibility for deciding upon the investments of the assets of the Fund
resides with the Secretary-General after consultation with an Investments
Committee and in the light of observations and suggestions made from time to
time by the Board on investment policy. The Secretary-General has appointed a
full-time Representative (RSG), a position established with effect from 1
January 2015, to oversee the Investments of the Assets of the UNJSPF. The Board
welcomed the appointment of the second full-time RSG effective 1 January 2018,
and noted the Secretary-General’s decision to rename the Investment Management
Division (IMD) the Office of Investment Management (OIM), consistent
with the level of the post of the RSG. The RSG’s report on the management of
the investments of the Fund was noted by the Board with appreciation, as was
the pro-bono service of the Investments Committee.
19.
TRANSPARENCY: In the
light of multiple instances of Board-confidential information being brought
into the public domain, often with misleading commentary, the Board discussed
the adequacy of the Declaration of Conflict of Interest for its Members and
attendees, adopted in 2015 with the intention that it be signed by all Members
and attendees. The discussion sought to clarify what information should be
considered confidential and how to balance this imperative with the need for
maximum transparency for all stakeholders. It was recalled that in the spirit
of transparency and in accordance with global best practice, all OIOS audit
reports on the Fund are, after due consideration, made public. These reports
include management comments, including those on recommendations where
management was not in agreement with the OIOS observation or recommendations.
20.
COMMUNICATION: The
Board sees it as essential, in future, for adequate resources to be made
available to the Fund to ensure a professional communication function, required
for proper outreach to its 205,000 stakeholders.
21. WORKING
METHODS OF THE BOARD: The
Board maintained its long tradition of consensus for decision-making by finding
practical and equitable solutions for the vast majority of items before it.
Over 95% of all decisions were taken in this manner with the vast majority of
Members in agreement. Where a Member or Members disagreed, it was recorded. The
Board is pleased to affirm the collegial, professional, positive and
forward-looking nature of the majority of the Members, consistent with the
practice of the Board.
22. NEXT
MEETING: The Board
will meet again in July 2019, hosted by the United Nations Office in
Nairobi. The Board’s 2020 regular session will the hosted at the World
Meteorological Organization in Geneva.
Mr. John Levins
Ms. Jane B Makori Ms. Theresa Panuccio Mr. Md. Mustafizur Rahman
Chair, 65th Session First Vice-Chair Second Vice-Chair Rapporteur
Participants
Governing Bodies Executive Heads Governing Bodies
FAO/WFP
UNIDO (Kenya) UN Secretary-General General Assembly (Bangladesh)
Rome, 30 August 2018
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