UNJSPF to monitor potential long-term risks
GLOBAL - The UN Joint Staff Pension Fund confirmed it is closely monitoring market conditions “in the upcoming months” to identify and address potential long-term risks that could negatively impact the fund.
In his introduction to the 2009 Annual Report, Bernard Cochemé, chief executive of the UNJSPF, said while the scheme lost 25% of its value in 2008 to end the year at $31bn (€21.5bn), its ability to meet its obligations and pay benefits “remains intact”.
Cochemé stated: “In the short-term, contribution income of $1.84bn is almost equal to benefit payments of $1.87bn; therefore, the pension fund only has to rely on a very small portion ($38m) of the income generated from its investment portfolio ($1.2bn) to cover its obligations and the costs of its operations. The pension fund does not need to sell any securities in order to ensure liquidity.”
Figures from the annual report showed the pension fund continued to grow in 2008, while the number of participants increased by 5.9% to 112,800 and the number of beneficiaries rose 3.2% to 59,900.
Cochemé therefore admitted that although the fund remains stable in the short-term, “nevertheless it is clear that if current market conditions persist and the long-term investment return objectives are not met, they will have a negative impact on the fund’s actuarial balance and thus its long-term solvency”.
He added the UNJSPF “will continue to closely monitor the situation in the upcoming months in order to identify and address potential risks in the long-run”.
The report also showed the scheme’s total expenditure for benefits, administration and investment costs of $1.9bn in 2008 exceeded contribution income by around $114m, although contribution income increased 5.9% from $1.7bn in 2007 to $1.8bn a year later, although the fund’s assets dropped 24.9^ from $41.4bn to $31.2bn.
Figures revealed the first quarter of 2009 was also disappointing for the fund as it returned -7.2% and saw the value of the UNJSPF drop a further 7.3% to $29bn. In contrast, however, the latest quarterly investment update issued in July highlighted a recovery as the fund rose by 12.3% to $32.6bn by the end of June 2009. (See earlier IPE articles: UNJSPF lost quarter of its value in 2008 and UN staff fund grew 12.3% in second quarter)
The UNJSPF report meanwhile showed the scheme’s long-term return objective of a real, inflation-adjusted rate of 3.5% was only achieved in the 15, 20, 25 and 49-year periods because of the “unprecedented volatility in the global markets”, which included a real return of 3.6% over 49 years.
The actuarial update remains the same as its last valuation was in December 2007, which recorded a funding level of 147% and an actuarial surplus of 0.49%, although the report noted the committee of actuaries was scheduled to meet in June 2009 to “consider the economic and demographic assumptions to be used in the actuarial valuation that is to be carried out at 31 December 2009”.
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