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The 75th session of the Pension Board concludes

31 July 2023

The United Nations Joint Staff Pension Board has concluded its 75th session, in which it considered numerous important pension matters, including the asset-liability management study, the funding policy, assumptions for the next actuarial valuation, the performance of the United Nations Joint Staff Pension Fund’s pension administration and investments, the financial statements for the year ended 31 December 2022, the proposed 2024 administrative budget, and annual reports from the United Nations Board of Auditors and Office of Internal Oversight Services.

The meeting was hosted by the International Maritime Organization in London (United Kingdom) from 24 to 28 July 2023, in a hybrid format, with both in-person and remote participation. Below is a summary of the main discussions and decisions.

Asset-Liability Management (ALM) study

Every four years, the Fund undertakes an ALM study using an expert, external consultancy firm.  The goal of the study was to assess the impact of key investment and solvency-related decisions (such as the funding policy) on the long-term financial condition and performance of the UNJSPF. A key objective of the study was to recommend strategic asset allocations that would improve the long-term financial outlook of the Fund.

The 2023 ALM study considered various scenarios for the future, including scenarios that incorporated climate risk. The Board took note that, under a baseline scenario with moderate growth and a suitable asset allocation, the Fund should still expect the required contribution rate to remain within a targeted range of 21.7 per cent to 25.7 per cent of pensionable remuneration. This means that the current contribution rate would remain adequate under that scenario. Another scenario considered the impact of a financial crisis arising from a failure to transition to Net Zero. This scenario would be more challenging for the Fund, and it is important that the Fund continues to monitor the impact of climate risk over the long term. The ALM study provides crucial insight for the Fund’s Office of Investment Management in developing its future strategic asset allocation, with an emphasis on continued risk management to ensure long-term sustainability of the Fund.

Funding Policy

At its 66th session in 2019, the Board agreed that a funding policy should be developed to document the Fund’s funding and risk management process. The purpose of the UNJSPF Funding Policy is to assist in ensuring that the Fund’s obligations to beneficiaries can be met over the long-term. The policy sets out the methods, processes and targets that are used to monitor the funding position and associated risks. The Board approved the Funding Policy, which includes a funding target of maintaining the required contribution rate within a range of 21.7 per cent to 25.7 per cent of pensionable remuneration.

Assumptions for the next actuarial valuation

The next actuarial valuation will be performed as at 31 December 2023, with the results to be reviewed by the Board at its July 2024 session. Actuarial valuations, which determine the solvency of the Fund at a point in time, are based on a wide set of assumptions for the long-term future. These include, for example, future growth of participants and various demographic assumptions.

The Pension Board agreed that a 6 per cent nominal rate of return (composed of a 3.4 per cent real rate of return on investments (arithmetic) and a 2.6 per cent inflation rate) should be used for the upcoming actuarial valuation as of 31 December 2023. This is a change from recent actuarial valuations that used an assumption of 3.5 per cent. This change reflects the growing evidence that various global factors, such as climate change, evolving demographics and the future economic outlook, will likely lead to lower future long-term investment returns than have been observed in the past.

Performance of the Fund

Ms. Rosemarie McClean, the Chief Executive of Pension Administration, highlighted that pension payments have continued to be issued on time. For the year 2022 and the first half of the year 2023, over 90 per cent of pension cases have continued to be processed within 15 business days of the reception of relevant documents by the Fund. Continuous improvement is being made in the area of client service, with client queries by telephone being answered in less than a minute. Ms. McClean stressed that the success of the Digital Certificate of Entitlement continues, with more than 36% of the eligible population of retirees and beneficiaries using this option. Ms. McClean presented the main strategic objectives of Pension Administration for 2024 and beyond. A strong focus will be placed on a systems upgrade, which is a necessity as systems are aging. The intention is to adopt a gradual, phased approach over a six-year horizon.

Mr. Pedro Guazo, Representative of the Secretary-General for the investment of the assets of the Fund (RSG), reported that the investment portfolio was valued at USD 85.5 billion as of 20 July 2023. All asset classes outperformed their benchmark over the one and three-year periods. The RSG informed the Pension Board that an independent study found that the Pension Fund compared favorably against other pension funds in terms of cost and return of the assets (as disclosed here).

Eligibility for spousal benefits under articles 34 and 35 of the UNJSPF Regulations

In its resolution 77/258, the General Assembly requested the Board to provide to it the framework for the extension of the “Guidelines to determine eligibility for spousal benefits under articles 34 and 35 of the UNJSPF Regulations (Rev.1)” (the “Guidelines”). The General Assembly’s specific request was that, without prejudice to national law, the Guidelines be extended to allow retrospective recognition of beneficiaries arising from marriages, in cases where changes under national legislation occurred after the time of the former participants’ separation from service and they separated prior to the adoption of the Guidelines in 2016. The Guidelines will be revised to reflect the 75th Board-approved principles and conditions of eligibility, and published in the coming weeks. Those Guidelines will set out the specific eligibility criteria and deadlines that must be met. The Board will be reporting back to the General Assembly on the details of the framework in its report.

2022 Financial Statements

The Board approved the 2022 audited financial statements, after reviewing the report of the United Nations Board of Auditors. The financial statements will be presented to the United Nations General Assembly. The Board of Auditors issued an unqualified audit opinion on the Fund’s financial statements and were pleased to note that 83% of its previous audit recommendations had been implemented. The high rate of implementation was compared favorably against other audited offices and demonstrated the strong commitment of the Fund’s management to address outstanding audit recommendations.

2024 Budget Proposal

The Pension Board approved the Fund’s 2024 budget, which will be submitted to the United Nations General Assembly for final approval.

Next Steps

The Board will submit its report on its 75th session to the United Nations General Assembly in the coming weeks. The Board’s report is expected to be published in September 2023.

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