U General Conference 32nd session, Paris 2003 32 C 32 C/44 21 July 2003 Original: English Item 11.13 of the provisional agenda UNITED NATIONS JOINT STAFF PENSION FUND AND UNESCO STAFF PENSION COMMITTEE OUTLINE Source: Article 14(a) and 6(c) of the Regulations of the United Nations Joint Staff Pension Fund; 31 C/Resolution 49. Background: The United Nations Joint Staff Pension Fund was established in 1949 by a resolution of the United Nations General Assembly. UNESCO s participation agreement with the Pension Fund dates from 1 January 1951. As a member organization of the Pension Fund, UNESCO has a tripartite Staff Pension Committee which is composed of nine members and nine alternates, of whom one third are appointed by the General Conference, one third by the Director-General and one third by the participants in the Pension Fund. Purpose: The purpose of this document is twofold. The first part deals with the report by the Director-General on the United Nations Joint Staff Pension Fund. The second concerns the designation of Member States representatives to the UNESCO Staff Pension Committee. Part I is submitted for information to the General Conference, in conformity with Article 14(a) mentioned above. It describes the main developments in the pension system since the Director-General s previous report made in 2001 at the 31st session and gives a summary of the operations of the Fund during the financial year ended 31 December 2001, the investments of the Fund and its actuarial position. In Part II, the General Conference, in conformity with Article 6(c) mentioned above, is required to designate its representatives, consisting of three members and three alternates, to the UNESCO Staff Pension Committee for the period 1 January 2004 to 31 December 2005. Decision required: paragraph 25.
32 C/44 I. UNITED NATIONS JOINT STAFF PENSION FUND BACKGROUND 1. The United Nations Joint Staff Pension Fund (UNJSPF) was established in 1949 by a resolution of the United Nations General Assembly, to provide retirement, death, disability and related benefits for the staff upon cessation of their services with the United Nations and the other organizations of the United Nations system participating in the Fund. UNESCO s participation agreement with the Pension Fund dates from January 1951. 2. The participating organizations jointly administer the Fund through the United Nations Joint Staff Pension Board (UNJSPB), which consists of 33 members, representing the 20 participating organizations. This Board is a tripartite body whose members are as follows: (a) one third are elected by the General Assembly of the United Nations and the corresponding governing bodies of the other member organizations; (b) one third by the executive heads; and (c) one third are the elected representatives of the participants. 3. The General Assembly of the United Nations decides changes in the Regulations governing the Pension Fund and in the pension adjustment system. The UNJSPB reports regularly to the United Nations General Assembly on the operations of the Fund and on the investment of its assets. It recommends when necessary amendments to the Regulations which govern, inter alia, the rates of contribution by the participants (currently 7.9% of their pensionable remuneration) and by the organizations (twice the foregoing amount, i.e. 15.8% of pensionable remuneration of participants), eligibility for participation and the benefits to which participants and their dependant may become entitled. 4. This part of the present report is submitted for information to the General Conference in accordance with Article 14(a) of the Regulations of the United Nations Joint Staff Pension Fund which provides that: The Board shall present to the General Assembly and to the member organizations, at least once every two years, a report, including a balance sheet, on the operation of the Fund, and shall inform each member organization of any action taken by the General Assembly upon the report. 5. Due to the biennialization of the work of the Fifth Committee of the General Assembly, the United Nations pension system is now considered by the Assembly only in even-numbered years (i.e. non-budget years). 6. Since the Director-General s report to the General Conference at its 31st session in November 2001 (31 C/38), the Pension Board has submitted one report to the General Assembly 1 in 2002. OPERATIONS OF THE FUND 7. The operations of the Fund during the financial year ended 31 December 2001 may be summarized as follows: From 1 January 2000 to 31 December 2001 the number of participants increased from 68,935 to 80,082 or by 16.2%; 1 Copy of this report (supplement A/57/9) will be made available to delegates who wish to consult it.
32 C/44 page 2 During the same period the Fund s principal increased from $15,765,388,830 to $17,631,678,812 or by 11.8%; For 2001, income from the Fund s investments amounted to $2,233,551,857 comprising $1,422,820,282 in interests and dividends, and $810,731,575 in net profit on sales of investments; As at 31 December 2001 the Fund was paying 49,415 periodic benefits, the breakdown of which is as follows: Retirement benefits 15,558 Early retirements benefits 10,720 Deferred retirement benefits 6,509 Widow s or widower s benefits 7,687 Children s benefits 8,049 Disability benefits 845 Secondary dependants benefits 42 In the course of the biennium, 8,630 lump-sum withdrawals and other settlements were paid. INVESTMENTS OF THE FUND 8. As of 31 March 2002 the normal reporting date used in the reports of the representative of the Secretary-General for the investments of the Fund to the Pension Board the market value of the assets stood at $21,789 million, as against $26,056 million as of March 2000. The total investment return was negative 15.0% for the year ending 31 March 2001 and positive 0.7% for the year ending 31 March 2002. The total annualized return for the biennium was therefore negative 7.5%. 9. Considering that the retirement and other related benefits of the United Nations pension system are secured through the assets of the Fund, the long-term investment objectives of the Fund are, first, to preserve the principal of the Fund and secondly, to obtain an optimal investment return while avoiding undue risk. The management of the Fund s investments is geared to maintaining a careful balance between risk and reward expectations over the medium to long term, rather than taking the risk inherent in seeking very high short-term returns. All funds are invested according to specific criteria of safety, profitability, liquidity and convertibility. 10. The $26 billion in assets were distributed among equities, bonds, real estate and short-term investments, i.e. on 31 March 2002: 57% in equities, 27.9% in bonds, 5.5% in real estate and 9.6% in short-term holdings. Of the Fund s assets, 42.7% were invested in 26 other currencies than the United States dollar. The Fund continued its efforts, in accordance with the established investment criteria, to identify appropriate investment opportunities in developing countries. Direct and indirect investments in developing countries amounted to $1,120 million at cost on 31 March 2002. 11. The need for the Fund to have a benchmark was stated by the General Assembly in its resolution 49/224, in 1994. The benchmark selected by the Secretary-General, in consultation with the Investments Committee, was implemented in January 1997. The development of this strategic benchmark is used to measure the investment performance of the Fund.
32 C/44 page 3 OTHER DEVELOPMENTS IN 2001 Management Charter 12. A Management Charter was presented in 2001 in order to strengthen the Fund s relationship with all its constituents and to maximize the Fund s administrative and operational efficiency. Among the six objectives cited in the Charter, the main ones are: (1) Re-engineering project: $8.2 million were approved to implement projects to process improvements through automation and specific technologies for realizing such enhancements in the most cost effective and quality assured manner. (2) Enhancement of the Geneva Office: UNESCO and ILO are now serviced by the Fund s Geneva Office, taking advantage of (a) geographical proximity and time zone; (b) language commonality; and (c) knowledge of national banking practices, regulations and laws. (3) Communication policy: As part of the Fund s enhanced communications policy, individual booklets are issued and distributed on specialized topics drawn from the Regulations, Rules and Pension Adjustment System of the Fund: two-track pension adjustment system, rights to validation and restoration, disability entitlements, survivor s benefits, etc. ACTUARIAL POSITION OF THE FUND 13. The Fund s Consulting Actuary as at 31 December 2001 carried out an actuarial valuation of the Fund, and the Committee of Actuaries, the Pension Board and the General Assembly reviewed its results. The primary purpose of such valuations, which are normally undertaken every two years, is to determine whether the present and estimated future assets of the Fund will be sufficient to meet its present and estimated future liabilities, using various actuarial assumptions as to future economic and demographic developments. 14. As noted by the Committee of Actuaries, for the third consecutive time the Regular Valuation as at 31 December 2001 disclosed an actuarial surplus. This surplus of $4,284.4 million represented 8.0% of the Fund s projected liabilities. 15. After considering all relevant data, the Committee and the Consulting Actuary were of the view that it would be prudent to set aside a portion of the surplus equivalent to 1.0% to 2.0% of pensionable remuneration for adverse contingencies, subject to future review. CHANGES MADE IN THE PENSION SYSTEM 16. The General Assembly, at its fifty-seventh session acting on the recommendations of the United Nations Joint Staff Pension Board, approved by its resolution 57/286 a number of minor changes in the Regulations of the Fund such as: With effect from 1 April 2003, the addition of a new paragraph stating that a participant is deemed to have separated when he or she is on leave without pay for an extended period of time without concurrent contributions having been paid to the Fund ;
32 C/44 page 4 With effect from 1 April 2003, amendments to Articles 28, 30 and 34 of the Regulations of the Fund, to increase the ceilings applicable in the commutation of the minimum benefits. 17. The General Assembly, at its fifty-seventh session, while approving in principle the other changes proposed by the United Nations Joint Staff Pension Board, introduced a delay in their application by adding the following condition to begin at such time as the actuarial valuation of the Fund shows a clear upward pattern of surpluses to the measures proposed. These measures were: the changes in the benefit provisions of the regulations of the Fund, that would eliminate the limitation on the right to restoration for existing and future participants; the changes in the pension adjustment system related to: (1) the application of cost-of-living adjustments to deferred retirement benefits as from age 50; (2) the application of cost-of-living differential factors to deferred retirement benefits as from the date of separation; (3) the elimination of 1.5 percentage point reduction in the first consumer price index adjustment due to existing and future beneficiaries. Transfer agreement with the European Organization for the Safety of Air Navigation and the Organization for Security and Cooperation in Europe 18. The General Assembly gave its concurrence to a Transfer Agreement approved by the Board with the European Organization for the Safety of Air Navigation and the Organization for Security and Cooperation in Europe. This Agreement was concluded in accordance with Article 13 of the Regulations of the Fund. Application of the International Criminal Court to become a member of the United Nations Joint Staff Pension Fund 19. The General Assembly noted that the International Criminal Court has considered to become a member organization of the Fund and that a formal application would be submitted to the Standing Committee in 2003, with possible membership to take effect on 1 January 2004. II. UNESCO STAFF PENSION COMMITTEE 20. In fulfillment of its obligations under the Regulations and Rules of the United Nations Joint Staff Pension Fund, the UNESCO Staff Pension Committee holds its meetings at the Headquarters of the Organization in Paris. Such meetings, which take half a day, are called as the need arises. On average, four or five meetings are held each year. 21. With regard to the rules governing the election of its representatives to the local Pension Committee, the General Conference has hitherto followed the practice of appointing Member States as members and alternates which in turn designate their representatives for the Committee. To avoid delaying the meetings and incurring unnecessary travel expenses, the General Conference has also tended to choose Member States which have Permanent Delegations to UNESCO in Paris, so that such States may designate their representatives from the staff of their Permanent Delegations based in Paris. It would be an advantage if the representatives were
32 C/44 page 5 bilingual in English and French since there is no budget provision for translation or interpretation costs. 22. The General Conference has also introduced the practice of appointing its representatives to the UNESCO Staff Pension Committee for a term of office corresponding to the interval between regular sessions of the Conference, namely for two years. It should be recalled that, as the Regulations of the Fund stipulate, Committee members and alternates are eligible for re-election. 23. In furtherance of 31 C/Resolution 59, the representatives of the following Member States have served on the UNESCO Staff Pension Committee for the period 2002-2003: As members Lao People s Democratic Republic Nigeria Peru As alternates Czech Republic Germany Mauritania 24. The General Conference as is borne out by its past designations of representatives to the Committee recognizes the need for some degree of continuity and experience in the administration of the Fund. This need is particularly felt today since the Pension Fund which serves the United Nations as a whole has grown from a relatively simple system to one highly complex, governed by provisions which are often unduly involved and difficult to understand. It would facilitate the procedures to be followed if the regional groups of Member States would consult in advance within the group for consideration of this item on the agenda of the Administrative Commission, in order to designate Member States for proposed appointment to the Committee. DECISION 25. Taking the foregoing considerations into account, the General Conference may wish to complete and adopt the following draft resolution along the following lines: The General Conference, 1. Having examined document 32 C/44, 2. Notes the report by the Director-General on the United Nations Joint Staff Pension Fund; 3. Appoints the representatives of the following six Member States to the UNESCO Staff Pension Committee for the period from 1 January 2004 to 31 December 2005: As members As alternates