The Secretary
The Standing Committee to the Pension Board UNJSPF, United Nations
P.O. Box # 5036
New York, N.Y. 10017, USA
P.O. Box # 5036
New York, N.Y. 10017, USA
Dear Members of the Standing Committee:
Ref: UN Retiree # R/63374
Subject: Restoration of full pension for 1/3 Lump Sum Recipients after a pre-determined period of commutation
Alike many other UN retirees, at the time of retiring from UN service, and based on very little pre-retirement pension related briefing, I opted for 1/3 lump sum with the balance of 2/3 pension being paid on monthly basis. In truth, the decision to opt for (or, in some cases, lured into accepting) lump sum payment was due to anxiety for resettling back in life with family and fulfil imminent commitments in a manner befitting the values and norms imbibed thru UN working life.
Ref: UN Retiree # R/63374
Subject: Restoration of full pension for 1/3 Lump Sum Recipients after a pre-determined period of commutation
Alike many other UN retirees, at the time of retiring from UN service, and based on very little pre-retirement pension related briefing, I opted for 1/3 lump sum with the balance of 2/3 pension being paid on monthly basis. In truth, the decision to opt for (or, in some cases, lured into accepting) lump sum payment was due to anxiety for resettling back in life with family and fulfil imminent commitments in a manner befitting the values and norms imbibed thru UN working life.
We are aware of earlier appeals for the restoration of full pension to the 1/3 lump sum seekers, having been denied under pretext of existing co-joined rules in a manner we consider as unclear and unfair application of pensioners “valuable rights” without regard to equity and natural justice.
Shielded by “immunities” (that should essentially be used for UN functionaries in the conduct of their humanitarian work), and governed by its own committees, rules, etc. UNJSPF has assumed a pedestal unlike any other pension fund system, thus rendering the UN pensioners to accept whatever decision made by UNJSPF internal management, without recourse to any independent, impartial, transparent and non-UN adjudication/judicial process.
It is our considered view that contrary to the civil service pension systems in many countries, incl. my own, the non-restoration of full pension after the 1/3 lump sum payment having been fully recovered with interest over many years is NOT in accordance with the letter and spirit of a number of Articles in the Universal Declaration of Human Rights (UDHR) for which UN and its agencies/affiliates should remain the prime custodians and model of governance for the rest of the world.
In accordance with the statement by the UN Secretary General on the last Human Rights Day (20 December 2008), he declared that “we can only honour the towering vision of that inspiring document (UDHR) when its principles are fully applied everywhere for everyone”.
In other words, it is our view that the UNJSPF’s currently practiced rules and procedures appear to be ultra vires to the basic fundamental principles of UDHR and UN charter governing its management. Please see the following:
Article 10 of UDHR: the universal right to full equality to a fair ...hearing by an independent and impartial tribunal... This is being denied to the 1/3 lump sum seekers because of the existing in-house UNJSPF mechanism for dispute-resolution, which cannot be seen as “independent and impartial tribunal”. Such an in-house mechanism with judge and prosecution belonging to the same genre may be acceptable to the staff in
service, but certainly not suitable for retirees who are no longer UN staff members and located in different parts of the world and are subject to national laws and regulations.
Article 19 of UDHR: this article assures freedom to seek and receive.... information...thru any media and regardless of frontiers...We consider this right as invaluable to receive prompt, correct and truthful information regarding the basis, philosophy and justification, if any, for the life-time denial of full pension for 1/3 lump sum recipients in the context of pension fund reforms in many civil service pension systems that consider pension for old people as “valuable right” and treat all pensioners with equity and fairness.
In other words, it is our view that the UNJSPF’s currently practiced rules and procedures appear to be ultra vires to the basic fundamental principles of UDHR and UN charter governing its management. Please see the following:
Article 10 of UDHR: the universal right to full equality to a fair ...hearing by an independent and impartial tribunal... This is being denied to the 1/3 lump sum seekers because of the existing in-house UNJSPF mechanism for dispute-resolution, which cannot be seen as “independent and impartial tribunal”. Such an in-house mechanism with judge and prosecution belonging to the same genre may be acceptable to the staff in
service, but certainly not suitable for retirees who are no longer UN staff members and located in different parts of the world and are subject to national laws and regulations.
Article 19 of UDHR: this article assures freedom to seek and receive.... information...thru any media and regardless of frontiers...We consider this right as invaluable to receive prompt, correct and truthful information regarding the basis, philosophy and justification, if any, for the life-time denial of full pension for 1/3 lump sum recipients in the context of pension fund reforms in many civil service pension systems that consider pension for old people as “valuable right” and treat all pensioners with equity and fairness.
Article 22 of UDHR: this article provides for... social security and its realization thru national efforts and international cooperation.... in accordance with the organization and resources...indispensable for his dignity and the free development....Here again, for many in the developing world, UN pension is often the main or probably the only source of income for social security and dignified living. Denial of full-pension even after the recovery of all the 1/3 lump sum + interest, in the context of rising costs and in the absence of any other social safety net, cannot be seen (by any stretch of imagination) as being fair and equal in the treatment of all pensioner with dignity...equity and fairness.. or based on natural justice.
Article 25 of UDHC: this article confers the right to a standard of living adequate for the health and well-being of him/herself and of his/her family....including safety/security net to take care of circumstances beyond control..
If this is indeed a fundamental human right enshrined in the UN governance, how can anyone justify the denial of a significant part of UN pension even after its full recovery during the commutation period?
Article 28 of UDHR: this article guarantees a social and international order in which the rights and freedoms set forth in the UDHR can be fully realized.
In the context of what has been pointed out above, can UNJSPF management declare, in good conscience, that it is abiding by the UDHR in the treatment of its pensioners, especially those of 1/3 lump sum recipients even after the full recovery of the 1/3 lump sum payments.
In these circumstances, I/we believe that it is already time for an enlightened organization like UN/UNJSPF to review its rules, regulations, procedures and working methods, especially over 50 years during which time many fault lines would have been exposed, and ensure these are in full accordance with the fundamental values enshrined in the UN charter and UDHR, so that all UN Pensioners are treated with equity, fairness and based on natural justice.
Such a goal will indeed be a worthy accomplishment in the present UN Development Decade and serve as model for good governance.
Thank you for your consideration, Yours sincerely,
Name of Retiree: V.Muthuswami
Retiree # R/63374
Signature:
(Hard copy duly signed to follow thru normal airmail registered post)
Attachment: Annexure (giving three examples of reasonableness and sustainability of restoring full pension to the 1/3 lump-sum recipients)
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Annexure
Example I - Comparison of lump sum against current value based on inflation index (US)
Assumptions: Lump Sum received in 1995 based on 13 yrs annuity value period: $2000 X 12 X 13 = $ 312,000
Lump sum takes into account the interest receivable to UNJSPF because this lump sum paid in advance vs. entitlement payable monthly as normal standard pension.
Monthly pay back to UNJSPF by way of reduced pension = $ 2,000 (for ever, as per current practice)
As per North American inflation index for the period 1995 - 2008, (156 months) the value of $ 312,000 in 1995 would be costing currently (2008) $ 436,700
Against this, UNJSPF investing $2,000 monthly basis (i.e. money recovered from the pensioner based on pension reduction) at 4.0% interest and allowing 2% inflation would result in a return in 2008 of $464,070.
This would seem that UNJSPF would be entitled a maturity value of $464,070, thus gaining $ 464,070 minus $436,700 (current value of lump sum as above) = $ 27,370 in terms of current (2008) value for the same period (156 months).
Explained differently, inflation adjusted buying power of $464,070 would be currently $357,900, which is again more than $45,900 against lump sum payment of $ 312,000.
Therefore, it would appear that UNJSPF would stand to gain even more when the pensioner lives beyond the actuarial age of life expectancy, with reduced pension continuing.
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Example II – A former pensioner’s simple calculation of loss incurred
by opting for 1/3 Lump sum vs. full pension
UN Pension `One-third' option appears beneficial device for the Pension Fund. How? Commuting one-third of our pension appears “valuable” (tempting) especially by Indians and nationals of other developing countries where life expectancy is not that attractive and several immediate commitments waiting to be taken care upon retirement. As such, we find UN pensioners in India have, by and large, opted for one-third commutations. But, given the life-styles (affording a good diet, a reasonably good house, regular health-check-ups and taking corrective action when necessary) that we have enjoyed as UN employees, we find, and there are definite indications among our members that confirm that we can expect to live an above average life. With better life expectancy, however, we become LOSERS in case we had availed of the `one-third' option. How? A colleague (M.L. Sharma of UNICEF) had done some research about the loss that we thus incur. He has calculated that the Pension Fund has already realized much more than what they had paid him by way of a lump-sum amount of 1/3rd of his commuted pension. He retired on 31 Dec 1982 and received a lump-sum of US S73,451. The chart below shows that in 11 years time up to DEC 1993 ML has fully paid back (in fact a little more) what he had received from the Pension Fund as the `commuted' amount representing 1/3rd of his pension. Thereafter, January 1994 onwards, for the rest of his life he has to be content with the reduced pension deprived of the 1/3rd portion. This shall remain a recurring loss, but whatever the loss be we wish him well and a long life.
From
To
Monthly 2/3 pension
1/3 loss X months
Total Loss
1/83 3/84 937 468 x 15 70204/84 3/86 1001 500x24 120004'86 3/88 1040 520x24 124804/88 3/89 1099 550x12 66004/89 3/90 1147 574x12 68804/90 3/91 1201 600x12 72004/91 3/92 1274 637x12 76444/92 12/93 1314 657x21 13797 Against US S 73,451 received by commutation, by 12/93 I had lost ---- 73,621 My loss is further multiplying since Jan 94 1/94 3/94 1314 657x3 19714/94 3/96 1388 694x24 166564/96 3/97 1463 731x12 87724/97 12/97 1512 756 x 9 6804
TOTAL LOSS up to Dec 97 107824 1/3 recd on retirement in Jan 1983 73451As such net loss up-to-date (up to 12/97) 34373 The chart shows that in 11 yrs the Pen Fund has fully recovered rather a little more than what they had paid by way of 1/3 commuted pension
Notes:
1. The above table is based on reality, i.e the lump sum having been used up for family resettlement and other immediate social/family obligations, hence Not available/used for any investment purpose.
2. Based on UNJSPF making an average monthly investment of $600 (representing 1/3 portion recovered from pensioner’s standard pension) for the same period (1983 – 1997: 180 months) – with an interest rate of 4% adjusted for inflation of 2% per annum – will result as follows:
Final maturity value at the end of 180 months: $ 170,570
Inflation adjusted value of the above $ 126,400
Thus, by approving the 1/3 lump sum of $73,451 in Jan 1983, and using 1/3 monthly reduction in standard pension for recurring investment, UNJSPF has gained significantly.
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Example III – Sustainability vis-a-vis restoration of full pension after a pre-determined commutation period
1. Given the above examples of UNJSPF gaining thru lump sum payment and reduced pension for indefinite period, the required adjustments, if any, based on actuarial analysis be undertaken to implement full restoration of pension after pre-determined commutation period. Hypothetically, this adjustment may be accomplished in several ways, i.e. adjustment in contribution levels, factors used for lump sum calculation, pre-determined (not for life time) period for the purpose of reduced pension payment, demographic differentiation in actuarial age of life-expectancy, etc.
2. UNJSPF, as a social security agency to fulfil the mandates of Universal Declaration of Human Rights (UDHR), should strive to treat all pensioners on the basis of equity and fairness, once the lump sum indebtedness of the pensioner remains fulfilled. UNJSPF has an obligation to be seen to be operating as what UN Secretary General declared during a recent Human Rights Day (20 Dec 2008) that “we can only honour the towering vision of that inspiring document (viz. UDHR) when its principles are duly applied everywhere and for everyone.”
3. In fulfilling the above UDHR obligation, UNJSPF secretariat should be advising the UN legislative bodies on the necessary changes, if any, in regard to policies/procedures to be implemented, i.e. to ensure sustainability and at the same time achieving the goals of equity and fairness enshrined in the UDHR.
4. In the case of (lump sum recipient) national staff and whose pension is adjusted by government COL index for their reduced 2/3 pension do not reflect the actual market rate increases in their cost of living. This is further exasperated in the case of GS staff receiving only a minimum stipulated pension payment.
5. It is important that UN pension system be comparable to many enlightened civil service pension systems rather than private groups, and yet sustainable based on UDHR values.
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May 2009
