The 70th session of the UN Joint Staff Pension Board, a two-day virtual meeting, concluded today, recognizing the strong performance in pension administration and investments of the UN Joint Staff Pension Fund (UNJSPF).
The agenda included statements from the Fund’s pension administration and investment management heads, the Board’s work plan for 2022, implementation of the measures approved to improve governance, a proposal to establish a group to review the Fund’s plan design and the recruitment of an ethics advisor to the Pension Board.
Ms. Rosemarie McClean, Chief Executive of Pension Administration, reported strong performance in 2021. Ninety per cent of initial pension cases were processed within the benchmark of 15 business days in 2021, even though the volume of cases increased by 18 per cent compared to 2020. Pension payments have continued to be issued on time, with new payment channels set up for Afghanistan and Mali with the UN Treasury as international banking channels became unavailable in these countries.
Ms. McClean further highlighted progress in the modernization of the Fund’s administration of benefits, including the digitalization of the yearly Certificate of Entitlement for retirees and beneficiaries. About 50 per cent of retirees and beneficiaries have used digital transfer of the form through Member Self-Service, the Fund’s digital portal, or the Digital CE mobile app launched in 2021, avoiding manual handling of more than 30,000 pieces of paper. More digitalization is underway, Ms. McClean added, including the digital capture of payment instruction for separating participants, which will guide them in the selection of their pension options and prevent errors in the transmission of banking information to the Fund. This new project is expected to be completed later this year.
Mr. Pedro Guazo, Representative of the Secretary-General for the management of the assets of UNJSPF, highlighted that the assets values increased significantly in 2021, reaching nearly USD 91 billion at the end of the year. Investments showed a preliminary real rate of return of 4.27 per cent, well above the 3.5 per cent long-term target to ensure financial sustainability of the Fund.
Turning to the situation of the management of fixed income investments (see here for all the asset classes and their distribution), Mr. Guazo and Mr. Toru Shindo, Chief Investment Officer, explained that, following the departure of the Director of the fixed income team, pending the recruitment of the approved new staff and given the sustained underperformance against the benchmark of this asset class , the fixed income team of the Fund’s Office of Investment Management proposed to invest temporarily around 18 per cent of the Fund’s assets through external managers, under the team’s direction and supervision.
The proposed part of the portfolio that will be invested temporarily through external managers will remain in the UNJSPF’s accounts and they will be invested passively. This means that this portfolio will only be invested following instructions and benchmarks defined by UNJSPF. This is considered a good practice and proper due diligence and monitoring will be carried out.
The cost of the portfolio to be invested temporarily through external managers is marginal. The annual fee will be around 0.01 per cent of the portfolios managed (equivalent to less than US$3 million a year), and this cost will be recovered many times over through the anticipated improvements in the return of this portfolio. As such, the financial and budgetary impact will be beneficial to the Fund. This arrangement will be in place until a new Director and the team are onboarded and the performance metrics of the internally managed portfolio are met.
The Pension Board noted that the investments of the assets of the pension fund will not be “outsourced”, and the use of external managers is a mechanism that was endorsed by this Board in 2019.
With respect to the proposal for review of the plan, Ms. McClean clarified that the review was intended to consider improvements and simplification in a holistic manner. The last general review took place in 2008-2010, and regular review is good pension industry practice, she added.
The Board agreed to establish a group to review the plan. Such review would take into account the long-term sustainability of the Fund and be without prejudice to the defined benefit nature of the Fund and two-track system without impacting negatively existing benefits under the Fund Regulations and Rules.
The Board expects that the review group will present recommendations to the Board at its session in July 2023 or earlier. It will provide interim updates at the July 2022 and February 2023 sessions.
The Pension Board endorsed the recruitment of an Ethics Advisor, the appointment of whom was included as part of the UNJSPF governance reform endorsed by the UN General Assembly in its 2021 resolution on pension matters.
The 70th session of the Pension Board was the first meeting out of the three meetings planned this year. Having three sessions a year, including two virtual ones, is also an outcome of the governance reform endorsed by the UN General Assembly, allowing the Pension Board to spread its annual programme of work with shorter sessions instead of concentrating decision making on one single session in July as previously.