The US private sector has been dumping defined benefit fund (DB) plans for quite some time now. I have already explained in Pension Primer the different types of basic pension funds.
The DB plan in the UN will pay you until death do us apart and the surviving spouse, if any, gets half of the full pension . And currently in this financial crisis, a good DB pension plan is a life saver for retirees. I think that those who took a full pension in recent years may have made a wise decision. And those who invested lump sums in the stock market may be painfully in much trouble unless they are well diversified in stocks, bonds and cash.
What worries me though is the impact that the economic downturn will have on DB pensions such as the UNJSPF. Pension plans have to invest in a mixture of fixed income (bonds and other short-term instruments) and stocks for growth to guarantee payments for future years maintaining sufficient liquidity for monthly pension payments. For instance, in June 1984, the 30-year treasury rate was 13.43%. Five years later it was 8.47% and 5 years after that 7.06%. Today it is between 3-4%. The impact of such low interest rates over this prolonged period may have a profound impact on pension liabilities (that is, your monthly payouts). We hope that the UNJSFP has factored market risks in their equations to make the fund as shock-proof for even a 50% decline in the stock market.
In a worst-case scenario, we may have to take a pension cut to share the burden.
UN agencies and AFICS should lead the charge to get a measure of how UNJSPF is coping with the financial crisis. Waiting until we are in the weeds may limit options and creative thinking. I think UNJSPF should be encouraged to send quarterly reports to its members through AFICS newsletters or by postings on their websites to restore confidence in worried UN retirees.
Perhaps, the time is also right to suggest some minor reforms to the UN Pension fund. I have three suggestions to make due to shifting work patterns and longevity:
1. Support phased retirement so that UN staff can retire early and work at the same time contributing to their retirement pension when the final retirement age is reached.
2. Raising the retirement age to 65 for all staff.
3. Change the payment methods so that the spouse will get 50% of the benefit paid to the retiree. That means, the UN retiree gets 2/3 of the payment and the spouse gets 1/3. This change will be good to support the rights of women throughout the world.
Other references: UN Pension & Salary - Is there discrimination against women?
Have you already requested AFICS-NY to move this matter? - madan arora
Posted by: madan arora | November 27, 2008 at 12:08 AM