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United Nations staff members and retirees, concerned for many years about low-investment performance by our $54 billion pension fund and unprecedented delays in benefit payments, welcomed the adoption last December of a General Assembly resolution that allayed worries about attempts to privatize the fund. The resolution reaffirmed that UN financial rules and regulations remain the governing framework of the fund.
At the same time, the resolution highlighted serious problems in the fund, including prolonged vacancies in key posts and weaknesses in risk management, investment management and benefits payment management. It requested that Secretary-General António Guterres and the pension board take remedial action.
The Assembly asked the secretary-general to fill all vacant posts, improve investment performance, mitigate foreign-exchange losses, implement the antifraud and anticorruption policy, request the UN Office of Internal Oversight Services to conduct comprehensive audits of the fund’s policies and report on the performance of his representative for investments, Carol Boykin.
The Assembly asked the pension board to address the causes of the unprecedented delays in the payment of pension benefits and fill all vacant posts.
Who will fix the problems?
The question foremost in the minds of UN staff members and retirees is, Who will the secretary-general rely on to carry out these tasks? Is it Guterres’s four representatives on the pension board (one each from management, finance, human resources and legal); or the under secretary-general for management, a post that may soon see new blood? If so, what have these representatives been doing about the dysfunction on both sides of the fund?
Similarly, the board’s performance is not encouraging. Under its chair, Vladimir Yossifov, it muzzled the staff unions at last July’s annual board meeting in Vienna, intimidated the media who reported on problems in the fund and pushed to renew the five-year contract of the fund’s chief executive officer, Sergio Arvizú, a year ahead, despite indications of managerial deficiencies.
Why should Guterres not rely on Boykin and Arvizú to fix the problems? According to a board of auditors report, the fund lost $7.3 billion in investment income and $3.4 billion in foreign exchange in 2014-2015. In 2016, real return on investments was 2.93 percent, compared wih the fund’s 3.5 percent target. Failure to achieve its benchmark puts the fund’s solvency at risk.
A “Pensions and Investments” article on Jan. 23, 2017, noted that last year was exceptionally good for both American-based and global funds. Real returns on investment ranged from 18.40 percent in Britain to 2.30 percent in Japan and averaged 4.6 percent in the United States (see chart below).
The board of auditors report also noted that the Investment Management Division has no system to mitigate foreign-exchange losses or guidelines to select or evaluate outside managers. It has also reportedly never compared its brokerage commission fees with its peers to ensure that outside managers are not overpaid.
Boykin reportedly barred staff members of the Investment Management Division from recent investment committee meetings, where the problems raised in the General Assembly resolution were to be discussed.
A statement dated Feb. 21, 2017, by Warren Sach of the Federation of Associations of Former International Civil servants, our retiree representative organization, noted that Deloitte Touche began an independent review of fund investments on Feb. 13, 2017, as requested by the board. According to the statement, neither Boykin nor her staff has so far participated.
Last year, Arvizú presented to the pension board a positive report by PWC (PriceWaterhouseCoopers) on the fund’s IT system, which helped to push for renewing his contract a year in advance.
Yet a report leaked last December of a UN Office of Internal Oversight Services audit on the backlog in pension payments indicated that delays were caused by “poor implementation of the new IT system called IPAS, lax management, and a six month delay between problems emerging and action being taken.”
The final report is available to UN member states and will soon be publicly available.
Reliable sources note that this year, Arvizú has commissioned outside consultants to do a full review of pension payments to present to the board. Participants and beneficiaries are entitled to transparency about this current contract, given the General Assembly’s admonition in its resolution that the fund “avoid[s] the use of consultants in its operations.”
The UN Dispute Tribunal recently admonished Arvizú over his selection of a former Office of Internal Oversight Services staff member involved in audits of the fund’s IT system as that person sought a senior post in the fund, saying: “The UN is not a private corporation and its posts are financed through public funds, which calls for transparency and accountability in the recruitment system.”
In addition, a secretariat staff representative for the fund has been threatened with being fired, and Arvizú is said to be lobbying for this year’s board meeting to be moved from New York, ostensibly to avoid possible demonstrations by staff members and retirees there.
How Guterres Can Make a Difference
Retirees are gratified by the attention that the Federation of Associations of Former International Civil Servants, which has six nonvoting seats on the pension board, is paying to the fund’s investment issues. Still, concerns remain. Confidence in the federation’s president has been at low ebb for some time.
Linda Saputelli, until recently president of the association’s New York branch, consistently dismissed concerns about problems in the fund. She has not supported the staff unions’ efforts, tried to discourage an audit by the UN Office of Internal Oversight Services on the backlog in pension payments and supported the board’s push for early renewal of Arvizú’s contract.
How can staff members and retirees ensure that the General Assembly resolution will be implemented to keep our life savings safe and our fund healthy for current and future generations of beneficiaries?
One way is to ensure that our voices are heard. Elections are coming up in March for four participant representatives to the UN Staff Pension Committee, with voting rights on the board. Only current staff members are eligible to run or to vote. For any hope of turning around the situation in our fund, these elections must be free and fair. The record, however, is not encouraging. Arvizú has reportedly withheld contact information from the polling officers and forced them to eke out such details from the various UN departments instead, slowing the process.
For the fund to right itself, we need change in the leadership of the fund, the board and the Federation of Associations of Former International Civil Servants.
When the UN staff unions met with Guterres in January, one issue that was raised was the need to fix the problems at the fund — because without his personal attention, there is little hope for meaningful change.
The ship has been sailing off course for far too long. Secretary-General Guterres, please act now to protect our fund.