Overview of the Fund’s activities

1. Presentation to FAFICS Council Overview of the Fund’s activities July 2014

2. Contents • Key messages • Sustainability • Key indicators • Environment • Main activities and initiatives • GA Resolutions • Conclusions

3. Key messages 1- The Fund has been significantly strengthened and is in a very good operational and financial situation.

4. Key messages 2- The Fund’s good financial and operational situation is a direct result of a set of actions and projects in line with the strategies and goals approved by the Pension Boardnecessary to keep the pension promiseas well as to improve the Fund’s servicing capacity for the benefit of its participants, retirees, beneficiaries and member organizations.

5. Key messages 3- The Fund faces structural as well as external challenges. It has a very complex plan design, a multi-tiered and bifurcated governance, is maturing and its operation requires a global reach. Additionally, there are significant changes and challenges in the environment in which the Fund operates.

6. Key Questions Is necessary to continue modernizing and adapting to changes in the environment? Who bears the risks?

7. Change • Mainframe • COBOL based systems • Year-end reporting only (some reporting entities) • Paper (vs. electronic reporting) • “old” Data center • Lack of BC/DR • No EWRM process or policy • No ALM prior to 2007

8. Priorities • Keeping the Pension Promise • Solvency • Operational processes and infrastructure • Knowledge • Client Service Focus • Risk Management

9. Examples – Challenges/Changes • Working Group on Sustainability • DC solution • ASHI • Fund solution • Funding • Withdrawal settlements for staff with contributory service of less than 5 years • PEP

10. Sustainability

11. The Fund is in a good financial position

12. Highlights of Valuation Results • Required Contribution Rate = 24.42% of PR • Compared to 23.70% actual contribution rate, deficit = 0.72% of PR • Improvement of 1.15% vs. rate of 25.57% disclosed in prior valuation • Increase in Normal/Early Retirement Ages decreased contribution rate by 1.16% of PR – source of virtually the entire change in the contribution rate

13. Actuarial Valuation

14. Actuarial Valuation – Cash Flow • Assuming the expected annual 3.5% real rate of return is earned: The principal of the Fund will not be utilized to cover benefits gap at least for the next 50 years. • Even in a “catastrophic” scenario if the real return on investments is only 2.5% per year: The principal will not start to be utilized until 2034.

15. Key indicators

16. Active Participants and Benefits in Payment 2004-2013 69,980 120,294 Over the last 10 years the population serviced by the Fund has grown by approximately 33%

17. Benefit Payments Volumes • During the 2012-2013 biennium, the Fund made 1,357,021 payments, amounting to $4,547 million USD. • This represents an increase of $459 million USD (or 11%) and 84,835 more payments (or 7%) than in the previous biennium. • A similar (biennium over biennium) increase was also observed in 2010-2011 with an increase of $337 million USD (or 9%) and 72,559 more payments (or 6%) than in the previous biennium. • This highlights the large size of the Fund and the increasing transactional volume faced by the Fund every year.

18. Number of complex cases serviced and number of documents processed • Since 1999, the Fund has observed a significant increase (51%) in the number of benefits processed after separation from active service (“complex cases”). • The number of documents read, indexed, filed, scanned, routed and processed during the 2012-2013 biennium reached 1,359,044 documents. • This represents an increase of 54,139 (or 4.1%)compared to the previous biennium (1,304,905 documents). • Again, this highlights the size and the increasing transactional volume faced by the Fund every year.

19. Enquiries addressed by Client Services • The number of enquiries processed by Client Services during the 2012/2013 biennium (40,237 enquiries)grew 38% compared to the level processed during the last biennium (29,068 enquiries). • The number of enquiries processed and responded to since 1999 has grown 235%. • Again, this highlights the very significant increase in the demand for Fund services from its participants, retirees and beneficiaries.

20. Fund’s numbers In summary … • The Fund is large and growing • The Fund is maturing • The Fund has global scope • The Fund is in a well funded-position

21. Environment

22. Changing Environment • Changes in banking practices (IBAN codes, regulatory changes, new clearing methods, etc.) • Economic, political or social events that prevent (or make difficult) payments in a country or region; • Changes in national legislations regarding the definition of marriage and spouse; • Changes in financial reporting (IPSAS and IFRS); • Availability of technological improvements (driving changes in Member Organizations’ systems and increased demand for self-service options, etc.)

23. Changing Environment • Catastrophic events that affect retirees or beneficiaries or the Fund’s operations; • Possible aberrations in relationship of inflation and foreign exchange; • More volatile financial markets (which have a significant impact on a maturing Fund since there is a growing interdependence of assets and liabilities); • Pressure to do more with less – difficult economic conditions (need for increased efficiency); • Changes in demographic factors (i.e. early retirement rates, longevity, participation, etc.)

24. Illustrative example – Other public DB schemes

25. Illustrative example: US-GAO 2012 Report on Pension Plans Source: Government Accountability Office (GAO) Report to Congress: “STATE AND LOCAL GOVERNMENT PENSION PLANS, Economic Downturn Spurs Efforts to Address Costs and Sustainability”. Report number GAO-12-322

26. Changing Environment • Challenging environment for any pension fund • But it is more challenging for the UNJSPF because it • is maturing • has a very complex plan design (665 calculations) • has global scope (operates in 190 countries, dealing with multiple currencies and CPI) • has a multi-tiered, complex governance structure

27. Main activities and initiatives

28. IPAS • All hardware has been modernized and standardized. • All of the Fund’s processes have been re-designedand improved. • The new solution is fully integrated with better controls, more flexibility and reporting capabilities. • The new solution addresses structural shortcomings and system obsolescence and internal control risks of the previous operating model and systems. • The implementation of IPAS will also represent a very significant positive change in knowledge management. • The IPAS project will allow the Fund to keep up with the changes in the environment and with increasing demand for services. Assessment

29. Strengthened Governance • The Fund has embarked on an initiative to reinforce its governance and operations. • Strengthened Governance • Full-time RSG (Pension Board proposal for new full-time post due to the complexity and size of the investment operations and for improved coordination of assets and liabilities) • HR flexibility(Pension Board request to RSG and CEO to review MoU to ensure HR management is in line with its operational and investment needs and to provide for better and more progressive career paths that would enhance service experience and knowledge to provide better services more efficiently and allow for required specializationand knowledge managementin benefit entitlement, client services, technical matters and investment management) • Financial Rules(working on draft to provide for clear financial controls and standards, as requested by Audit Committee and Board of Auditors, to improve transparency, accountability, financial control and operational efficiency.)

30. 2013 Mandate from Pension Board “To review and update the current MOU in order to find a more flexible method of recruiting staff that might best serve the needs of the Fund. The flexibility was needed to ensure that the Fund was able to hire, develop and promote the best qualified candidates and thereby preserving efficiency of its operations.”

31. Fund’s HR servicing needs • OHRM recognizes that present MoUis outdated, unclear, causing implementation difficulties • Pension Board and General Assembly recognize that pension administration and investment management require specific skills and experience.

32. Roles and Partnership in Review of MoU • RSG: Provides HR servicing requirements for IMD • CEO: Provides HR servicing requirements for Fund secretariat • OHRM/OLA: OHRM and OLA review the HR servicing requirements submitted by the Fund (RSG and CEO) and propose the best instrument to adopt that fulfills the Fund’s needs in the current environment • RSG, CEO, OHRM/OLA follow a partnership approach to coordinate update and improvement in the HR servicing instrument mechanism that responds to the HR needs of the Fund.

33. Current Status The draft MoU is under review by OHRM and OLA

34. Review of HR framework • There are no plans to either lower any recruitment standards or centralize additional powers to the CEO; there are no plans to outsource jobs of the Pension Fund and there are no plans to otherwise negatively affect the existing staff, including their contractual status. • The Fund has no plans to change anything with regard to its investments or in the way it is financed, managed or administered.

35. Review of HR framework • An improved and streamlined HR framework, codified in a revised MoU between the Fund and the OHRM, will provide for better and more progressive career paths within the Fund, including professional training and staff development, and minimize risks associated with the loss of institutional memory (e.g. trained and long-serving staff), ultimately improving the Fund’s service to its constituents as well as strengthening its long-term solvency.

36. Strengthened Operations • Strengthened Operations • New IT and Operational Platform(replace aging IT infrastructure and systems with a modern integrated IT solution and new target operating model. This is the most ambitious and large scale IT and operational project in the Fund’s history) • Risk Management and Control(a series of initiatives to improve risk management and mitigate risks) • Fraud Prevention Scenarios • Internal Control and Enterprise Risk Management Policies • Statement of Internal Control

37. Assets and Liabilities Monitoring Committee • In order to improve communications between the Fund’s management and the Board on investment policy and strategy and to enable the Fund to better monitor the balance of assets and liabilities, the Board approved the establishment of an Assets and Liabilities Monitoring Committee. • The ALM Committee works with the support of the Fund’s management, the Investments Committee, the Committee of Actuaries and the Consulting Actuary to monitor the solvency of the Fund and to provide advice and recommendations to the Board with regard to risk management, funding policy, asset-liability management and investment policy.

38. CFA Project • In order to significantly reduce the banking charges in 13 countries in West and Central Africa, the Fund implemented a new banking mechanism that directly connects six local accounts (3 in XAF and 3 in XOF) with two regional clearing houses. • This project implied departing from centralized disbursement method and “opening” PENSYS during IPAS implementation. • The Fund developed and tested the new mechanism as well as the changes to the payroll system. • This project benefits some 1,000 beneficiaries. • The new mechanism is in place since Q4 2013. • The Fund is working on a similar arrangement for India and Pakistan and is opening USD denominated accounts in those countries that would lower bank charges and would improve operational and financial control.

39. Emergency Fund • Increased utilization of Emergency Fund • The Fund has made special arrangements to facilitate processing of Emergency Fund cases under exceptional circumstances which may cause special unforeseen hardship in individual situations. • For example: the significant flooding in Thailand that impacted a region where many of the Fund’s retirees and beneficiaries reside. The Fund processed a total of 224 casesin line with this more proactive approach. • The same approach was utilized in November 2013 to assist Fund’s retirees and beneficiaries residing in the Philippines which were affected by the Typhoon Haiyan.

40. Other Initiatives • Project for streamlining the routing of complex (multi-correspondent bank) payment instructions (reducing costs, manual intervention and returned payments) • Business continuity/disaster recovery is continually tested and kept current • Significant progress in the Interface Project to link the Fund electronically to 80 reporting entities (transmitting HR and finance data to the Fund) • Important and very valuable partnership with FAFICS and 56 AFICS offices. Outreach activities (pre-retirement and post-retirement seminars in Geneva and Rome)

41. Main activities and initiatives Financial Statements

42. Financial Statements Significant improvements • Reporting of financial instruments at fair value • Presentation of fair value hierarchy • Recognition of unrealized AND realized gains and losses (Volatility) • Separate presentation of foreign currency gains and losses • Recognition and presentation of transaction costs and management fees • Recognition of Expenses on an accrual basis • Recognition and presentation of certain benefit payables • Presentation of administrative expenses on an accrual basis • Budget reconciliation remains on a modified cash basis (Schedule 1) • Capitalization of Fixed and Intangible Assets (included in other assets)

43. Audit Opinion on the Fund’s Financial Statements In our opinion, these financial statements present fairly, in all material respects, the financial position of United Nations Joint Staff Pension Fund as at 31 December 2013 and its financial performance for the year then ended in accordance with the International Public Sector Accounting Standards. From the BOA DRAFT Report, Supplement No. 9 (A/68/9) BOA noted smooth implementation of IPSAS and increased quality of the financial statements.

44. Main activities and initiatives Audit

45. 5. Internal Audit – completed audits • The results of the last four audits with no recommendations (includes audit of actuarial process in 2012) • From all previous audits, the Fund secretariat has only one outstanding audit recommendation which requires filling a vacant post in the Financial Services Section.

46. Internal Audit 46 • The results of the last four audits with no recommendations (includes audit of actuarial process in 2012) • From all previous audits, the Fund secretariat has only one outstanding audit recommendation which requires filling a vacant post in the Financial Services Section. 46 As of March 31, 2014 * Murex – IT management and governance ** ALM audit – ALM Committee to define and recommend the approval of the Fund’s risk appetite / risk tolerance to the Pension Board).

47. Appeals Procedure

48. UNJSPF Appeals procedure • After consultation with FAFICS, the Fund has agreed to recall JSPB/61/R.34 (prepared in response to the note submitted by FAFICS - JSPB/61/R.34) requesting a review of the UNJSPF appeals procedures. • The Fund will continue to study the matter, analyse best practices as observed in several national jurisdictions that may have a similar "lighter" or streamlined approach to administrative claims similar to the Fund’s pension claims. • The common understanding is that the objective is not to try to convert the Standing Committee into a court, but to continue to follow a rule-based approach, have an efficient and effective process and to explore alternatives to further professionalize and strengthen the proceedings of the Standing Committee. The Fund secretariat will consult FAFICS and other interested parties. The results of the study will presented to the Pension Board in 2016.

49. GA Resolutions

50. Full-time RSG The General Assembly: • Decided to approve a full time Representative of the Secretary-General for the management of the assets of the Fund. • Approved the corresponding Terms of Reference. • Article 19 (c) not approved “(c) In order to assist the Secretary-General in carrying out his or her responsibilities under these Regulations for deciding upon the investment of the assets of the Fund, the Secretary-General shall appoint, after consultation with the Board, a full time Representative for the Investment of the Assets of the United Nations Joint Staff Pension Fund.” • The position has been advertised by the Secretary-General.