The $67 Billion UN Pension Fund: The Good, the Bad and the Ugly

by Lorraine Rickard-Martin. This article originally appeared in PassBlue.

Since 2014, when staff members of the United Nations Pension Fund blew the whistle on serious mismanagement in its secretariat, a change in leadership has been made on both sides — assets and liabilities — of the $67.4 billion fund. Yet the turmoil persists.

Since 2014, when staff members of the United Nations Pension Fund blew the whistle on serious mismanagement in its secretariat, a change in leadership has been made on both sides — assets and liabilities — of the $67.4 billion fund. Yet the turmoil persists.

Stabilizing the fund’s management and investment decisions has been mandated by General Assembly governance reforms that culminated in a 2018 resolution, A/RES/73/274, amid a continuing dysfunctional culture clouding the fund’s operations.

Rejection of independent audits and other checks and balances

The comprehensive governance audit ( A/73/341), June 2018) that the Assembly requested lays out numerous conflicts of interest between the pension board and the fund’s management.

The audit faced a chilly reception. Last year at the board’s annual meeting in Rome, it rejected most of the findings and referred the UN oversight auditors to the Independent Audit Advisory Committee, alleging a “flawed and unprofessional” process.

Last month, the audit advisory committee affirmed in a letter dated Sept. 5 to the board’s chairman, Ambassador Philip Richard Owade (of Kenya), that it found no evidence that professional auditing practice and standards had not been followed.

Whistleblowers not welcomed

Board members’ resentment against the board’s UN participant representatives, who represent 85,000 active UN staff members and include the whistleblowers who raised awareness about problems in the fund’s secretariat under the ex-chief executive, Sergio Arvizù, drives board dynamics.

Additional tensions come from smaller UN specialized agencies on the board who fear reforms, particularly those in which they could lose their voting weights if adjustments are made to the board’s composition, based on relative numbers of members and size of contributions.

When the board tried to block the whistleblowers from taking their seats as elected members of the body, the UN Appeals Tribunal found in their favor and pronounced the board’s actions “unlawful” and “egregious.”

Undaunted, the board pursued amendments to fund rules and regulations to limit the scope of issues that were referred to the Appeals Tribunal and to prevent fund staff members from running for election to the board.

Slow-walking General Assembly reforms

The UN participant representatives said they were subjected to intimidation, physical threats and suspension in one case at the annual board meeting in Nairobi in July.

The board’s communiqué about the meeting, dated July 26, 2019, and posted on the fund’s website, is long on process, such as the need for attendees’ “loyalty, discretion and conscience” and confidentiality, but short on substance. There’s little expectation of meaningful substance in the board’s upcoming report on General the Assembly’s directives or requests.

Investments: a plus

The representative of the UN secretary-general for investments, Sudhir Rajkumar of India, reported that after record-low revenues were registered in December 2018, the market value for the fund had rebounded by last June from $60.4 billion to $67.4 billion. The fund is also exceeding its long-term real rate of return of 3.5 percent by a healthy margin.

On the fund’s environmental and social policy, on which Rajkumar promised a comprehensive report, the fund has divested from tobacco, arms and coal stocks but concerns remain about its investment in oil companies.

Concerns also linger over whether Rajkumar’s policy shifts from equities to alternative investments and an increased emphasis on geographic diversification will reduce some inflation risks while increasing others.

There are accusations that Rajkumar tends to micromanage and has a low tolerance for dissent, including on investment decisions, and that career staff members fear being displaced by waves of new recruits.

Asked about these problems, Rajkumar responded that change in management often results in such reactions, and that instead of micromanaging, he had strengthened the investment decision-making process. In addition, he had indicated to everyone that he would welcome a UN oversight investigation of all complaints that have been filed, so the truth could come out. While he understood that a few staff members might feel vulnerable because of low investment performance numbers, no career staff member had been displaced, nor was there any intention to do so.

The fund’s secretariat

When Janice Dunn Lee (of the United States), a former nuclear negotiator and deputy director general at the UN’s International Atomic Energy Agency, who has been acting chief executive of the fund’s secretariat since January, visited the fund’s Geneva office last week, staff members reportedly wore black. It prompted her to say she felt “disrespected.”

Geneva staff members apparently wore black to express their dismay that Lee has proposed, and the board has reportedly accepted, to move two senior jobs from Geneva to New York, purportedly to enhance coordination between the two offices. The president of the Geneva retiree association wrote to Lee on July 5, noting that the Geneva office serves beneficiaries in Europe, the Middle East and Africa (62 percent of all beneficiaries) and that the move will leave large numbers of beneficiaries underserved.

Years of fluctuating reports about the status of processing new and old benefit cases continues, with compliance against the 15-day benchmark for processing new cases ranging from 80 percent (according to Lee at a meeting of New York UN retirees last June) to 93.1 percent, as listed in a fund booklet titled “UNJSPF 70 Years 2019,” published last month. But an internal dashboard last week posted a compliance rate of 57 percent.

Regarding old cases, Lee announced in Nairobi at the annual board meeting, according to its communiqué, that “there is no backlog of entitlement cases.”

The audit (page 65) notes that of 15,000 pending cases that were not reported as backlog, the fund said it was not responsible for cases until all documentation was received, so those cases are not included in the count.

And what can be made of the $45 million of forfeitures of benefits, according to the fund’s 2018 financial statements; or 4000 cases slated for forfeiture, according to the UN participant representatives’ report?

Tone at the top

The audit recommends that the “Board should take effective measures to ensure that the secretariat of the fund sets the appropriate tone at the top with regard to integrity and ethical values.”

It is unclear who will ensure that the board adheres to these values, given these recent examples of rule-bending:

* The former chief executive’s disability agreement was processed, against fund rules, through the staff pension committee of the International Atomic Energy Agency, where he never worked. That way, the agreement bypassed the UN staff pension committee and was facilitated by the head of the UN Office of Human Resources, a board member.

* The UN Ethics Office substantiated, and the UN Administration accepted, that Arvizù, the ex-chief executive, retaliated against three fund staff members, yet the human resources office took no action.

* The human resources office, in collaboration with the board, advertised a job vacancy for a Pension Benefits Administrator/CEO in May, although the General Assembly decided to replace the single chief executive post by creating two separate ones: a Pension Benefits Administrator and Secretary to the Board, no later than January 2020.

What fund members want

First and foremost, the fund’s members want the General Assembly to end the board’s slow-walking of reforms and to enforce compliance.

To ensure equitable board representation, including direct election of retiree representatives for the sake of transparency and representative democracy.

To ensure a professional and transparent board that respects the fund’s rules and regulations, without onerous confidentiality requirements; respects the UN Code of Conduct “To Prevent Harassment, including Sexual Harassment, at UN System Events”; and ends attempts to intimidate and muzzle the UN participant representatives.

To ensure sound investment management in accordance with the fund’s longstanding policy of balancing safety and profitability and the highest environmental and social standards.

To have more attention paid to the people, including widows and orphans, behind the statistics of pending benefit cases and tens of millions of forfeitures; and reverse the decision to gut the Geneva office, leaving almost two-thirds of beneficiaries underserved.

To have the hardworking staff members of the fund be treated fairly and with respect for due process and end harassment of the fund staff representative.

To have Secretary-General António Guterres ensure that the incoming fund secretariat head, Rosemarie McClean, formerly with the Ontario [Canada] Teachers Pension Plan, who is due to arrive in January, has high-caliber senior staff members to work with.

To urge Guterres and his representatives on the board, who are already taking a constructive approach, to positively transform the fund’s grievance-based management culture. That is how the General Assembly reforms, so critical to the fund’s sustainability, can be achieved.

Originally published at on October 10, 2019.

Independent Coverage the United Nations. A project of The New School’s Studley Graduate Program in International Affairs, supported by the Carnegie Corporation.

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