Fifty-ninth General Assembly

Fifth Committee

31^st Meeting (AM)

BUDGET COMMITTEE APPROVES TEXT ON UN PENSION SYSTEM

 

The Fifth Committee (Administrative and Budgetary) this morning made recommendations to the General Assembly on the United Nations pension system, by approving, without a vote, a nine-part draft resolution.  The text addressed a broad range of issues, among them:  actuarial matters; the pension adjustment system and financial statements of the United Nations Joint Staff Pension Fund; administrative arrangements and longer-term objectives of the Pension Fund; size and composition of the Pension Board and the Standing Committee; investments of the Pension Fund and their diversification; as well as implementation of the recommendations of the Office of Internal Oversight Services (OIOS) on the Investment Management service of the Pension Fund.

By the terms of the draft, the Assembly would take note of the significant increase in the market value of the Fund’s assets and positive returns achieved during the previous biennium.  The Assembly would also note that a comprehensive review would be carried out of the investment policies and practices of the Investment Management service with a view to addressing the findings of the audit reports of the OIOS and the Board of Auditors.  The Assembly would further note the various recommendations of the Pension Board, including those related to changes, with effect from 1 April 2005, in the pension adjustment system.

While approving additional resources in the amount of some $5.34 million for the Fund’s administrative expenses for the current biennium, the Assembly would also take note of an upward trend in that respect and the intention of the Advisory Committee on Administrative and Budgetary Questions (ACABQ) to further consider the matter in the context of the Fund’s budget proposals for 2006-2007.

Concerning the increase of the Fund’s investments in developing countries, the Assembly would request the Secretary-General to report at its sixty-first session on the steps undertaken to increase such investments to the maximum extent possible.  It would also reaffirm the policy of diversification of the investments of the Fund across geographical areas, wherever that served the interests of the participants and beneficiaries of the Fund, in accordance with the criteria of safety, profitability, liquidity and convertibility.

In other action this morning, the Committee approved a draft decision, by which the Assembly would take note of the statistical report of the United Nations System Chief Executives Board for Coordination on the budgetary and financial situation of the United Nations system.  Among the statistics presented in the document are assessments payable by members under approved regular budgets; the level of voluntary contributions; and the level of working capital funds in relation to the level of approved regular budget estimates for 2004-2005.

Reports were introduced today by Vladimir Belov, Chief, Common Services Unit; Warren Sach, Director of the Programme, Planning and Budget Division; and Vladimir Kuznetsov, Chairman of the ACABQ.  The representative of Ecuador made a statement in explanation of position.

The Committee is expected to conclude its work for the main part of the session at 3 p.m. Friday, 17 December.

Background

The Fifth Committee (Administrative and Budgetary) this morning was expected to act on two draft texts and take up several reports related to the Organization’s budget for the current biennium.

The first document before the Committee was a note of the Secretary-General on construction of additional conference facilities at the Vienna International Centre (document A/C.5/59/23). 

According to the note, the Government of Austria offered in 2003 to provide a new conference facility to the organizations using the currently inadequate Vienna International Centre.  Those organizations are:  the International Atomic Energy Agency (IAEA); the United Nations Industrial Development Organization (UNIDO); and the Preparatory Commission for the Comprehensive Nuclear-Test-Ban Treaty Organization (CTBTO).

The Austrian Parliament has passed a law in April 2004 approving €50 million for the planning and construction of the project.  Organizations using the facilities offered a contribution of €2.5 million to be made in 2008.  It has been agreed on a preliminary basis that the eventual contribution of the United Nations in a future biennium will not exceed €100,000 (around $130,000) towards the construction costs.  For the first 10 years, annual maintenance costs are estimated at $930,000, of which the United Nations’ share would not exceed $37,200.

The Assembly is requested, among other things, to approve the participation of the United Nations, together with the other Vienna International Centre-based organizations, in the arrangements for the proposed new conference facility and to entrust the Secretary-General, in cooperation with the other three organizations, with determining the cost-sharing arrangements for potential future costs arising from the project.

Introduction of Reports

VLADIMIR BELOV, Chief, Common Services Unit, introduced the report on Construction of additional conference facilities at the Vienna International Centre (document A/C.5/59/23) saying the proposal would have no implications on the budget.  Those implications would start in 2008.

VLADIMIR KUZNITSOV, Chairman of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), introducing the related oral report from the ACABQ, said the Advisory Committee had taken up the note of the Secretary-General.  Since the early 1990s, with the increase of the number of participants to intergovernmental meetings, conference facilities of the Vienna International Centre had become increasingly inadequate.  The four organizations using the facility approached the host country authorities in 2002 with a request for making additional conference facilities available to them.  In parallel, there were discussions about asbestos removal expected to start in 2008.  A Memorandum of Understanding had been signed in October, in which participating organizations had welcomed the offer of the Austrian Government.

He said the main terms of the agreement reached included the fact that the Austrian Government was committed to providing a fully functional space for meetings and conferences.  The entire cost of the planning and construction of the centre would be borne by the Austrian Government.  An amount of €50 million had been set aside for that purpose.  The four participating organizations would make a fixed and final lump-sum contribution of €2.5 million.  That would be used to cover part of the cost of equipment and moveable furniture, with the Austrian Government financing the remaining non-construction costs.  The contribution of each participating organization towards the €2.5 million for the project would be established based on past usage and projections for future conference requirements.  Given the limited use of the new facility by the United Nations, a preliminary estimate of 4 per cent, or €100,000, had been established.

He said the Advisory Committee recommended approval of the request is contained in the Secretary-General’s note.

The Director of the Programme, Planning and Budget Division, WARREN SACH, introduced the Secretary-General’s report on revised estimates and programme budget implications:  effects of changes in rates of exchange and inflation (document A/C.5/59/24) -– a technical document issued to reflect revised amounts in respect of the impact of applying the new costing parameters of the first performance report to the revised estimates and statements of the programme budget implications currently being considered by the General Assembly.  The revisions took into account the same changes to the parameters as reflected in the first performance report in respect of operational rates of exchange, actual inflation experience, the outcome of salary surveys, payroll experience and the movement of post adjustment indices.

He said that, as a result of the application of the updated parameters to those estimates, a total increase of some $2.95 million arose relating to expenditure sections for all estimates currently under consideration by the Fifth Committee.  The adjustment to the expenditure sections largely reflected net increased requirements of $2.05 million, due to exchange rate fluctuation, with inflation and other standard adjustments amounting to $903,700.  The total adjustment included an increase in staff assessment requirements of $159,300, which would be offset by a corresponding increase under income section 1, Income from staff assessment.  The Fifth Committee was requested to approve the adjustments to the revised estimates and statements of programme budget implications set out in the report.

Introducing a related oral ACABQ report, the Chairman of the Advisory Committee, Mr. KUZNETSOV, recommended approval of the revised estimates submitted by the Secretary-General in document A/C.5/59/24.  The Secretary-General’s report detailed the impact of the application of the net costing parameters set out in the first performance report to revised estimates and statements of programme budget implications currently under consideration by the Assembly.  As a result of the application of updated parameters to those estimates, a total increase of some $2.95 million would arise.

Revised estimates for special political missions and the grant related to the future operations of the International Research and Training Institute for the Advancement of Women (INSTRAW) had not been subjected to recosting, he continued.  The Advisory Committee had been informed that requirements in respect of special political missions covered specific provisions for the periods budgeted in respect of each mission and were updated on the basis on information available at the time of preparation of the estimates.  Consequently, no revision was required at this time.  With regard to INSTRAW, it was a grant, which had been calculated on the basis of specific costing information tailored to reflect the experience of the Institute.  Those estimates, including staff salaries, were calculated on the basis of full incumbency of the existing posts and related operating expenses for the period concerned.  Therefore, the more general costing parameters used throughout the budget, including vacancy rate factors, were not relevant to INSTRAW.

The ACABQ noted that first performance report parameters would be taken into account in any statements of programme budget implications issued subsequent to the issuance of the Secretary-General’s report and prior to the conclusion of the work of the Fifth Committee at its current session.  If necessary, expected statements of programme budget implications for the high-level plenary meeting at the sixtieth session of the Assembly and requirements relating to appropriation of the budgetary provisions for the Joint Inspection Unit (JIU) would be prepared utilizing revised 2004-2005 rates.

Action on Draft Texts

The Committee first took up consideration of draft decision A/C.5/59/L.19, by which the Assembly would take note of the statistical report of the United Nations System Chief Executives Board for Coordination on the budgetary and financial situation of the United nations system, transmitted in a note by the Secretary-General (document A/59/315), approving it without a vote.

The Committee then took up a nine-part draft resolution on the United Nations pension system (document A/C.5/59/L.14), by the terms of which the Assembly would address the actuarial matters of the United Nations Joint Staff Pension Fund; the pension adjustment system; the financial statements of the Pension Fund and a related report of the Board of Auditors; administrative arrangements of the Fund; size and composition of the Pension Board and the Standing Committee; investments of the Pension Fund; diversification of investments of the Pension Fund; and implementation of the recommendations of the Office of Internal Oversight Services (OIOS) on the Investment Management service of the Pension Fund.

In particular, the Assembly would take note of the developments with respect to the actuarial surplus of the Pension Fund, which went from 0.36 per cent of pensionable remuneration as at 31 December 1997 to 4.25 per cent as at 31 December 2001 and to 1.14 per cent as at 31 December 2003, taking note of the Pension Board’s agreement with the recommendation of the Committee of Actuaries that most of the surplus should be retained.

With a view to securing continuity of pension rights, the Assembly would concur with the revised transfer agreements of the Fund with the Organization for Security and Cooperation in Europe (OSCE) and the World Trade Organization (WTO), as approved by the Board, as well as the new transfer agreements with the Universal Postal Union and the Preparatory Commission for the CTBTO.  It would also decide that the Inter-Parliamentary Union (IPU) would be admitted as a new member organization of the Fund, effective 1 January, 2005.

Also by the text, the Assembly would approve, with effect from 1 April 2005, the changes in the pension adjustment system, which would introduce a phased approach to the elimination of the 1.5 per cent reduction in the first consumer price index adjustments and add a new provision under the two-track pension adjustment system for an adjustable minimum guarantee at 80 per cent of the United States dollar-track amount.  The latter would be done with the understanding that, under the two-track adjustment system, benefits are subject to a maximum of 110 or 120 per cent of the local currency track, depending on the date of separation from service.  The Board would be requested to review the benefit of the two-track system vis-à-vis the dollar track for the beneficiaries of the Fund as a whole.  The Assembly would take note of the Board’s intention to address in 2006, subject to a favourable actuarial valuation at the end of 2005, possible total elimination of the balance of the 1.5 per cent reduction, as well as possible elimination of the limitation of the right to restoration based on the length of prior service.

The Assembly would also take note with satisfaction of the approval by the Pension Board of an internal audit charter, which recognizes and incorporated policy changes for the OIOS of the Secretariat.

While approving additional resources in the amount of some $5.34 million for the current biennium for the Fund’s administrative expenses, the Assembly would take note of an upward trend in that respect and the intention of the ACABQ to further consider the matter in the context of the Fund’s budget proposals for 2006-2007.

Among other matters, the Assembly would also note the Pension Board’s decision to make no changes in the current methodology used in the determination of the final average remuneration, but to consider a study containing actuarial cost assessments of a proposed early retirement protection measure.  Also to be considered by the Standing Committee in 2005 would be a report on a possible provision that would allow for purchase by participants of the Fund of additional years of contributory service.

On the Fund’s investments, the Assembly would take note of the significant increase in the market value of the Fund’s assets and positive returns achieved during the previous biennium.  It would note that a comprehensive review would be carried out of the investment policies and practices of the Investment Management service with a view to addressing the findings of the audit reports of the OIOS and the Board of Auditors.

Taking note of the increase of the Fund’s investments in developing countries, the Assembly would request the Secretary-General to report at its sixty-first session on the steps undertaken to increase such investments to the maximum extent possible.  It would also reaffirm the policy of diversification of the investments of the Fund across geographical areas, wherever that served the interests of the participants and beneficiaries of the Fund, in accordance with the criteria of safety, profitability, liquidity and convertibility.

The draft, as orally revised in the English version, was approved without a vote.

The representative of Ecuador, explaining her position after the vote, said her delegation had been happy to join consensus on the understanding that the information “on the special situation of pensioners living in countries having undergone dollarization and on possible proposals to attenuate the adverse consequences arising therefrom”, as asked for in paragraph 6 of section II, would provide just and applicable solutions that would help the situation of those affected.  In Ecuador, pensions were losing their purchasing power. She asked, therefore, for a speedy solution to the problem.

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