Pensions: Danger ahead (2)
Jean Michel Jakobowicz, UNOG. Participants Representative at the Pension Board
The Joint Staff Pension Board just finished its work
in Nairobi. Following the article published last
month in UN Special we received a number of letters
from readers raising their concerns about
what is going on. And between us, their concerns were and
are totally justified.
The Board’s agenda contained a great number of topics;
however, the part on investments monopolised the attention
of the meeting for most of the week.
Externalise or not? Indexing or not? The debates were violent
and passionate. On the one hand the Representative of
the Secretary-General, Mr Christopher Burnham, was trying
to persuade people that externalising and indexing
$8.5 billion corresponding to the assets invested in North
America was just a routine operation which could only be of
benefit to the Fund. On the other hand, participants were vigorously
requesting to have a global strategy of investment
before deciding on any type of indexation.
What does indexation mean: you choose an index like the
Dow Jones and then you buy exactly the same companies that
are included in the index. Where the problem arises is that
we have absolutely no idea which index to choose to match
our liabilities, the costs that indexing would imply, and, last
but not least, we absolutely have no idea of the risks
incurred. We have to believe the person that started by asking
the Board for a blank cheque of $145 million to privatise
the Fund and then declared at the podium (and is put on
record in the report) that such indexation would cost nothing
to finally ask for a budget of $3 million to outsource our North
American assets and to passively manage them. Frankly,
after having listened to him it’s rather difficult to have a clear
idea of what is going to happen.
Participant representatives stressed that it is difficult to
accept that $8.5 billion would be invested without a clear cut
global strategy of investment, especially when you know that
this strategy could be ready by the beginning of 2007, namely less than one year from now. Taking into account that the
result of the Funds are very good not only in the long term
but also in the short term, nothing seems to justify this haste,
except for the fact that someone is in a hurry …
Positions were so blocked that finally the Board had to
vote on this issue, an exceptional procedure in the history
of the Fund.
The results of the vote where clear: the administration
and governing bodies favoured indexation while participant
representatives voted against it. Whatever the
results were, they send a strong signal to the Secretary-General as well as to ACABQ.
When one knows that in the UN any expenses must be
accompanied by pages and pages of justification, it is regrettable
that to manage an amount of $8.5 billion, a few points
written on the back of an envelope
with some cooked up figures were
presented to the Board.
Palais des Nations at 1 p.m.
Pensions – Inter-agency
information meeting
UN staff and staff of specialized agencies, come en masse
Despite four years of work, the Board
could not achieve a consensus on its
size and composition which would
remain the same as it is currently.
All in all, the results of the management
of the Fund, which were studied by
the Board are a very good. For the tenth
year in a row the Fund has a surplus.
It is a pity that due to a risky
approach to investments, the spirit of
the meeting was poisoned and we
cannot sound positive. We must ask
you to remain mobilised in order to
avoid that adventurous investment
policies would compromise the
financial stability of the Fund.
© 2006 UN Special |