General Conference Twenty-sixth Session, Paris 1991 SUMMARY

Transcription

1 General Conference Twenty-sixth Session, Paris C 26 Cl66 30 August 1991 Original: English Item 10.4 of the provisional agenda UNITED NATIONS JOINT STAFF PENSION FUND REPORT BY THE DIRECTOR-GENERAL SUMMARY This report, which is submitted to the General Conference in accordance with Article 14(a) of the Regulations of the United Nations Joint Staff Pension Fund, describes the main developments in the pension system since the Director-General's previous report was made to the twenty-fifth session (25 C/63 and Add.). In particular it sets out the decisions taken by the United Nations General Assembly at its forty-fourth and forty-fifth sessions (December 1989 and December 1990 respectively) concerning the pension system. The report also informs the General Conference of recent decisions taken by the Pension Board at its forty-third session (Paris, July 1991) which will be submitted for approval of the forthcoming forty-sixth session of the United Nations General Assembly. for This report is submitted to the General Conference information.

2 26 Cl66 I. INTRODUCTION 1. The United Nations Joint Staff Pension Fund was established by the United Nations General Assembly in 1949, under Regulations adopted for the purpose, to provide retirement, death, disability and related benefits for the staff of the United Nations and the other organizations of the United Nations system participating in the Fund, which now number 16 in all. UNESCO's participation agreement with the Pension Fund dates from 1 January The member organizations jointly administer the Fund through the United Nations Joint Staff Pension Board consisting of 33 members. This Board is a tripartite body whose members are as follows: (a> one third are elected representatives of the General Assembly and the legislative bodies of the other member organizations; (b> one third are representatives nominated by the executive heads; and cc> one third are the representatives of the participants. 3. The operations of the Fund during the financial year ended 31 December 1990 may be summarized as follows: from 1989 to 1990 the number of participants increased from 56,222 to 58,263; during the same period the Fund's principal increased from US $7,579,591,411 to US $8,478,108,817; for 1990, income from the Fund's investments amounted to US $832,456,181 comprising US $553,587,499 in interests and dividends, and US $278,868,682 in net profit on sales of investments; total income of the Fund including investment income was US $1,420,958,956; as at 31 December 1990, the Fund was paying 30,901 periodic benefits, the breakdown of which is as follows: 10,397 retirement benefits 5,347 early retirement benefits 5,338 deferred retirement benefits 4,029 widows' or widowers' benefits 5,154 children's benefits 585 disability benefits 51 secondary dependants' benefits 4. Changes in the Regulations governing the Pension Fund and in the pension adjustment system are decided upon by the General Assembly of the United Nations. The Board annually reports 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 participants (currently 7.9 per cent of their pensionable remuneration) and by the organizations (twice the foregoing amount 15.8 per cent of pensionable remuneration of participants) eligibility FoF'participation and the benefits to which participants and the;r dependants may become entitled. 5. Article 14(a) of the Regulations of the Pension Fund provides that: 'The Board shall present annually to the General Assembly and to the member organizations 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'.

3 26 Cl66 - page 2 6. Since the Director-General's report to the General Conference at its twenty-fifth session, in 1989 (25 C/63 and Add.), the Board has submitted two reports to the General Assembly1 one in 1989 and the other in The salient decisions taken by the General Assembly on these annual reports are summarized below. II. DECISIONS TAKEN BY THE GENERAL ASSEMBLY AT ITS FORTY-FOURTH SESSION (1989) ON THE ANNUAL REPORT OF THE JOINT STAFF PENSION.BOARD 7. The decisions on pension matters taken by the United Nations General Assembly at its forty-fourth session (December 1989) introduced significant changes in the Regulations of the United Nations Joint Staff Pension Fund and in the pension adjustment system. They include measures to restore the actuarial balance of the Fund over the long term and modified procedures for the adjustment of the scale of pensionable remuneration of staff in the Professional and higher categories. (a> Measures to restore the actuarial balance of the Fund 8. The measures, adopted by the General Assembly for implementation effective 1 January 1990, were the following: (i) for new participants (i.e. those entering or re-entering the Fund on or after 1 January 19901, the normal retirement age under the Fund's Regulations will be 62 (instead of 60); (ii) cost-of-living adjustments of the deferred retirement benefits of participants who separate on or after 31 December 1989 commence only when they reach age 55 (instead of age 50 for those who separated before that date); (iii) for new participants (i.e. those entering or re-entering the Fund on or after 1 January 1990) who separate before age 57, the reduction factors applicable to early retirement benefits of ages 55 and 56 will be 6 percent for each year; and (iv) the rate of contribution was increased from 22.5 per cent to 23.7 per cent of pensionable remuneration, i.e. from 7.5 to 7.9 per cent for the participant and from 15 to 15.8 per cent for the employing organization. (b) Pensionable remuneration of staff in the Professional and hiqher catesories 9. The General Assembly decided, as recommended by ICSC, to modify the procedure for adjusting pensionable remuneration for the Professional and higher categories which included inter alia reduction of the next increase in pensionable remuneration by 2.8 percentage points. 10. The Commission and Pension Board were requested to study, in the framework of the comprehensive review, the desirablility of establishing a margin range between the pensionable remuneration of staff in the Professional and higher categories and of staff in comparable grades in the comparator civil service. 1. Copies of these reports (supplements 9 (A/44/9) and 9 (A/45/9) will be made available to delegates who wish to consult them.

4 26 Cl66 - page 3 cc> Disabled child's benefit 11. The General Assembly approved the recommendation of the Pension Board to provide, with effect from 1 January 1990, for the commencement of the payment of a disabled child's benefit at the same time as an early retirement benefit. Prior to this change, payment of any child's benefit could not commence until the participant taking an early retirement benefit either reached age 60 or died. III. DECISIONS TAKEN BY THE GENERAL ASSEMBLY AT ITS FORTY-FIFTH SESSION (1990) ON THE ANNUAL REPORT OF THE JOINT STAFF PENSION BOARD 12. At its forty-fifth session (December 1990) the United Nations General Assembly took the following decisions: (a> Pensionable remuneration of staff in the Professional and hiqher cateqories 13. Acting on the recommendations of the International Civil Service Commission (ICSC) and the United Nations Joint Staff Pension Board, the General Assembly approved the continued use of the methodology applied on the occasion of the previous comprehensive review in 1986 to derive the scale of pensionable remuneration for staff in the Professional and higher categories. Under this methodology the pensionable remuneration is established, for each grade and step, at a level which would yield a pension in United States dollar terms whose proportional relationship to the corresponding level of net remuneration in New York (i.e. the income replacement ratio) is comparable to the ratio of pension to net remuneration for their counterparts in the comparator service (the United States federal civil service>. 14. The General Assembly approved an amendment to Article 54(b) of the Regulations of the Pension Fund which incorporates the 1 November 1990 scale of pensionable remuneration and the procedure for automatic adjustments of that scale; the pensionable remuneration will be adjusted when there is an adjustment of the net remuneration in New York, on the same date and by the same percentage. 15. The evolution of the scale of pensionable remuneration will be monitored through annual reporting to the General Assembly of the relationship between the pensionable remuneration amounts for United Nations staff in the Professional and higher categories and for their counterparts in the United States federal civil service (i.e. the pensionable remuneration margin) and of the income replacement ratios in the two services. The Assembly did not establish a pensionable remuneration margin range, believing there was no need for it since: (a> automatic changes in the pensionable remuneration were linked to changes in the net remuneration in New York, with the latter already being controlled by a margin range; (b> there would be annual reporting to the Assembly on the evolution of the pensionable remuneration margin and the income replacement ratios; and cc> any proposed changes in pensionable remuneration due to changes in the income replacement ratios in the comparator service would require the approval of the General Assembly. 16. The General Assembly scheduled the next comprehensive review of the pensionable remuneration of staff in the Professional and higher categories for 1995.

5 26 Cl66 - page 4 (b) Chanqes in the pension adjustment system 17. The General Assembly approved the transitional measure proposed by the Board to deal with problems which would arise upon the expiration, on 31 December 1990, of the interim measure introduced in 1988 to determine the initial local currency pension of staff in the Professional and higher categories retiring in certain high-cost countries. The expiration of the interim measure, without any transitional arrangements, would have resulted in a drop in the initial local currency pensions of a number of participants retiring after 31 December 1990 from pension levels they had accrued as of that date. This transitional measure applies only to those participants retiring in the eligible countries - the countries where the 'floor' ratios had applied - during the 15-month period 1 January 1991 to 31 March 1992, who met both of the following conditions as of 31 December 1990: (i) they were in the Professional and higher categories; and (ii) they were at least 55 years of age and had at least five years of contributory service (i.e. they met the requirements for eligibility to an early retirement or retirement benefit). 18. For such participants the initial local currency pension upon their separation will not be less than what it would have been had they separated on 31 December 1990, at the age and with the final average remuneration and years of contributory service accrued as of that date. (c) Pensionable remuneration and pensions of unqraded officals 19. On the basis of the information provided in the report of the Board on the pensionable remuneration and net remuneration of ungraded officials who are participants in the Fund, including the executive heads of most of the member organizations of the Fund, the General Assembly requested the Commission, in full co-operation with the Board, to review the methodology for the determination of the pensionable remuneration of such officials and to submit recommendations to the General Assembly at its forty-sixth session. The General Assembly expressed the belief that a common system approach should be applied in determining the pensionable remuneration and pensions of all participants in the Fund, including ungraded officials. (d) Pensionable remuneration of staff in the General Service and other locally recruited cateqories 20. A comprehensive review of the methodology for the determination of the pensionable remuneration and consequent pensions of staff in the General Service and other locally recruited categories is being carried out by ICSC in full co-operation with the Board. The General Assembly requested that a report and recommendations on this subject be presented to its 'forthcoming forty-sixth session (October/December 1991). IV. FORTY-THIRD SESSION OF THE UNITED NATIONS JOINT STAFF PENSION BOARD 21. The forty-third session of the United Nations Joint Staff Pension Board was held at UNESCO Headquarters in Paris from 16 to 25 July 1991.

6 26 Cl66 - page The debate principally centred on three issues: (a> long-term modification of the pension adjustment system for staff in the Professional and higher categories; (b) comprehensive review of the pensionable remuneration and consequent pension of staff in the General Service and other locally recruited categories; (c) pensionable remuneration and consequent pensions of ungraded officials. (a> Lonq-term modification of the pension adjustment system for staff in the Professional and hiqher cateqories 23. The Pension Board decided to recommend to the General Assembly adoption of a modification of the 'Washington Formula', so as to give greater recognition of cost-of-living differences at places of retirement with higher post adjustment classes than the base of the system, New York. The modification would apply to Fund participants in the Professional and higher categories retiring as from 1 April The main elements of the proposed modification are the following: (i) the threshold for adjustment of the initial local-currency pension is at least one post adjustment class above New York as measured by the average post adjustment excess over the 36 months preceding the participant's retirement; (ii) the adjustment for each post adjustment class is for the full 5 per cent, with the exception that the first post adjustment class difference would give rise to a 3 per cent adjustment; (iii) ;!;aydjustment will not apply to the portion of a participant's average remuneration that exceeds the then annual pensionable remuneration at the level of P-4, step XV; (iv> there would be no adjustment for average cost-of-living differences greater than 15 post adjustment classes; (VI the special index would be applied to reduce the adjustment otherwise due at low-tax locations, where the tax rates were lower than those incorporated in the staff assessment; (vi) the modification would not apply to the General Service category; (vii) the cost of the proposed modification would be monitored over time and the Board would review it after the 1992 actuarial valuation of the Fund. (b) Comprehensive review of the pensionable remuneration and consequent pension of staff in the General Service and other locallv recruited cateqories 25. There was no agreement in the Pension Board on either retaining the existing methodology for determining the General Service pensionable remuneration or on supporting a specific alternative methodology. Pending further studies of alternative methodologies, the current methodology should continue to apply, subject to the review of the current staff assessment rates to be undertaken by the International Civil Service Commission (ICSC). Should a revision in staff assessment rates result in lower gross salaries and,

7 26 C/66 - page 6 hence, in the pensionable remuneration derived therefrom, transitional measures will be proposed. 26. As regards the future programme of work, both the Pension Board and ICSC will pursue, in close co-operation, pilot studies of: (i) the feasibility of determining General Service pensionable remuneration and/or pensions by reference to the best prevailing practices in each locality; (ii) the income replacement approach and, in particular the use of pre-determined income replacement ratios e.g., income replacement ratios of Professional staff, at each duty station; (iii) the 'Band approach' or direct application of local tax rates to derive gross salaries and, hence, pensionable remuneration from the net pensionable salaries. 27. In conjunction with the study of alternative methodologies, the Pension Board will consider several issues namely: (i) the current definition of pensionable remuneration for General Service staff; (ii> minimum pensions; (iii) the procedures for determining the final average remuneration (FAR); (iv) the adjustment of pensions in countries with high-inflation rates; (v) internationally recruited staff. (c) Pensionable remuneration and consequent pensions of unaraded officials 28. As it was not possible to reach a consensus in the Board on this subject the Board decided to defer taking any definitive position, until ICSC had recommended a methodology for the determination of the pensionable remuneration for ungraded officials who are participants in the Fund, including elected officials, and the governing bodies of the organizations have reacted thereto. It also decided to defer recommending any amendments to the Fund Regulations until the issues related to the pensionable remuneration of ungraded officials had been resolved. Decision reauested from the General Assembly 29. Since the legislative authority to change the Regulations of the Pension Fund and the pension adjustment system lies with the United Nations General Assembly, the recommendations of the Pension Board concerning the above three issues will be submitted to the General Assembly for consideration and decision at its forthcoming forty-sixth session.