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UN pension
lump-sum: reduction to be restored?
29 September 2009
For the past few months, a group of UN retirees has been engaged
in pursuing a lead provided by Dr. Venkatarma Muthuswami regarding
the fact that, after a certain number of years, the United Nations
Joint Staff Pension Board (UNJSPF) ends the reduction of benefits
for employees who at the time of retiring decide to commute a
portion of their pension into a lump-sum.
These efforts have not produced a definitive result. The retirees
claim that the UNJSPF’s practice of maintaining the
reduction for the lifetime of the pension should be abolished
because the lump-sum gets fully recovered over a period of a
number of years. However, on 20 July 2009, the CEO of the UNJSPF
informed them that the Standing Committee of the United Nations
Joint Staff Pension Board (UNJSPB) “decided to uphold the UNJSPF
decision to maintain the reduction as being fully compliant with
Article 1(f) and 28(g) of the UNJSPF Regulations…also confirmed
that the reduction in pension benefits on account of the optional
lump-sum commutation remains in effect for lifetime on the UNJSPF
retiree concerned”.
The Administration, through the Office of Staff Legal
Assistance (OSLA), has expressed the view that the reduction “does
not seem to violate any terms of your [their] contractual rights”.
The retirees concerned, arguing that “the policy, even as it stands, does
not take away our right to restoration of full pension…it is the
implementation by the UNJSPF that has gone wrong, and therefore an
administrative injustice”, have just submitted their common cause
appeal before the newly established UN Appeals Tribunal.
Since this is a matter which affects hundreds of pensioners who
are recipients of a lump-sum, we are pleased to publish the
information on what the concerned retirees call the gist of
their appeal in a letter they have sent to us:
“Our view is that not only has UNJSPF no explicit regulation/rule(s)
sanctioning such life-time denial of rights to the full pension
taking effect after the full recovery of the lump-sum, but also
there is no mutually-signed contract (duly witnessed) between the
lump-sum retiree and UNJSPF, except the so-called instructions for
payment document signed only by the retiree. One thing we have
maintained (and even challenged, although so far there has not
been an answer to this challenge) is that there is no Article or
Clause in the UNJSPF Regulations, which specifically and
categorically spells out that the beneficiaries who opt for the
lump-sum forfeit their right to a full pension for life.
The denial of the restoration of a full pension after a
pre-determined period is unfair evidence of differential treatment
between lump-sum recipients and those who continue on full pension
for life.
It is our considered view that UNJSPF's or any other UN family of
organizations' regulations and rules cannot and should not be
inconsistent with the fundamental principles of equity, fairness
and natural justice as enunciated in the UN Charter and Universal
Declaration of Human Rights.
The Indian Civil Service Pension restores full pension for such
lump-sum recipients after a 15-year period of reduced pension. We
understand India is not the only case. Is it just and
conscionable, for example, that our friend, Mr. Bhimayya, who
recently crossed the 101-year mark, should continue to pay for the
lump-sum he took over 40 years ago?”
However, for Merrill Cassell, a former Budget Director at UNICEF,
restoring the full pension “would not be financially prudent,
ethical or fair”.
In an exchange of several emails to the retirees published in his blog, Mr. Cassell writes:
“Simply put, the UN has two options: Option A: "lump-sum and
reduced pension"; and Option B: zero lump-sum and full pension.
Second, actuarial ages in the pension fund are not individual but
average, so there are lower and higher life-expectancies that
average out the funds disbursements.
By offering "B" to anyone who chose "A", the UN would be acting
unfairly to those who chose "B" initially.
If the UN were to set a precedent for others in the future to
choose "A" expecting that if they lived longer they would be
converted to "B", the result would be a pension plan that cost the
UN more than either "A" or "B".
There would be no reason for any pensioner not to choose "A": at
the time of distribution, the pensioner who chose "A" could choose
to invest their lump-sum in an annuity, taking their financial
position back to the equivalent of "B" until they lived to an
"average" age. And if they lived longer than average, they would
receive more than "B" for the remainder of their retirement (under
the "conversion to full pension" scenario).
Note that the ability of any "A" pensioner to make an "equivalent"
conversion at any future point in time (after distribution)
becomes necessarily limited: those who die early (or their heirs)
realize in retrospect a financial gain from having chosen "A", and
those who live longer realize in retrospect a financial loss from
having chosen "A".
I again underscore that, although lump-sums are used for different
purposes, for this case, we have to assume a hypothetical
assumption that lump-sums were invested for cash flow.”
It will be interesting to see how this case, the first common
cause appeal of the UN justice system, will be decided by the UN
Appeals Tribunal and if it will impact on the UNJSPF’s practice to
maintain the reduction for the lifetime of the pension.
Footnote: we are aware that those retirees interested in this
common cause appeal can contact the Registrar, UN Appeals
Tribunal, UN Secretariat,
New York,
NY 10017, USA, Email UNAT1@un.org.
Related
information:
Letter of the CEO of the UNJSPF to the retirees concerned -20
July 2009-
UNJSPF
Regulations and Rules
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