FC 110/23

Finance Committee

Table of Contents

I. INTERNATIONAL CIVIL SERVICE COMMISSION (ICSC)

A. UNITED NATIONS COMMON SYSTEM

Review of the pay and benefits system
Conditions of service of the professional and higher categories
Conditions of service of General Service and other locally recruited staff
Conditions of service applicable to both categories of staff

B. CHANGES IN SALARY SCALES AND ALLOWANCES

Professional and Higher Categories
General Service Category

II. UNITED NATIONS JOINT STAFF PENSION BOARD (UNJSPB)

A. ACTUARIAL METHODOLOGY AND ASSUMPTIONS

B. REPORT OF THE UN SECRETARY-GENERAL REPRESENTATIVE ON THE INVESTMENTS OF THE FUND

Financial Statements of the UNJSPF and Operations Statistics for the year ended 31 December 2004

1. The purpose of this paper is to inform the Committee of recent developments in the activities of the International Civil Service Commission (ICSC) and the United Nations Joint Staff Pension Board (UNJSPB) and changes in the conditions of service of staff in the professional and higher, and general service categories.

I. International Civil Service Commission (ICSC)

A. UNITED NATIONS COMMON SYSTEM

Review of the pay and benefits system

2. Under its review of the pay and benefits system, and at its sixtieth session, the ICSC considered the following items with a view to modernizing and simplifying allowances and benefits.

a) Spouse benefits (including dependency and single rates, salary structure)

3. The Commission decided to maintain the distinction in remuneration between staff with and without primary dependants; this practice was directly linked to a distinction maintained in the national taxation systems of Member States particularly at Headquarters locations. The distinction results in higher net salaries for staff with dependants to reflect, inter alia, the additional costs involved with additional dependants.

b) Children’s and secondary dependant’s allowance

4. The Commission, having noted that over the years the current system of children’s and secondary dependant’s allowances had functioned to the satisfaction of all parties and that no acceptable proposals were submitted to improve its operation, decided that the current system should be maintained. It would welcome, however, proposals on improving the local denomination scheme at a future date.

c) Mobility/hardship allowance, hazard pay and strategic bonuses

5. At its fifty-ninth session, the Commission, keeping in mind the concern expressed by the General Assembly at the cost of the mobility and hardship scheme, had decided:

1. to separate the mobility element from the hardship element;
2. to delink both the mobility and hardship allowances from the base/floor salary scale;
3. to defer the implementation of these decisions until a new system had been put in place; and,
4. to establish a working group comprising members of the Commission, its secretariat, organizations and staff to develop various options for compensating staff for service in hardship duty stations and for encouraging mobility.

6. The working group reported that prior to providing a final report to the Commission there was a need for accurate and comprehensive statistics before appropriate models that respected the need to maintain cost neutrality could be presented. The report further proposed that the following specific steps be taken in advancing the work of the group:

1. the organizations should work closely with the ICSC secretariat to provide the necessary statistics and assist in the development of the models for costing the proposals;
2. The working group on conditions of life and work in field duty stations should review and update the classification factors and the methodology for classifying the duty stations. The proposed revisions would be applied to a sample to determine the cost implications;
3. the organizations should develop any required proposal for taking into account the acquired rights of staff in transitioning to a new system. Data requirements for costing any such arrangements should be addressed.

7. The Commission, due the complexity of the matter, requested the working group to continue its work and encouraged all organizations to respond to its secretariat in a timely manner. It also requested that comprehensive and accurate data be provided that would permit the working group to establish parameters within which recommendations could be made.

d) Contractual arrangements

8. Following extensive review of the subject, the Commission had decided that three categories of appointments would adequately respond to the needs of the organizations: indefinite or continuing appointments, fixed term appointments and temporary appointments. It requested its secretariat to prepare a model contract for each of the three categories, outlining the key characteristics for each category. The characteristics should include details such as duration of tenure, mobility requirements, the requirements for a probationary period, procedure for progression to other contractual types, compensation packages, social security and health insurance provisions and procedures for extension or termination of contract.

9. In examining the model contracts submitted by its secretariat, the Commission expressed its appreciation for the collaborative work among the secretariat, organizations and staff. It also noted that general consensus had been reached on a viable framework that could be implemented by the organizations. It decided, therefore, to adopt a framework of guidelines for contractual arrangements and submit its final report to the General Assembly at its sixtieth session.

Conditions of service of the professional and higher categories

a) Base/floor salary scale

10. The Commission was informed that, in view of the movement of federal civil service salaries in the United States of America as from 1 January 2005, an adjustment of the United Nations common system’s scale by 2.49 per cent would be necessary in 2006 to maintain the base/floor scale in line with comparator’s General Schedule (base) scale.

11. The Commission, therefore, decided to recommend to the General Assembly that the current base/floor salary scale for the professional and higher categories be increased by 2.49 per cent through the standard consolidation procedures, on a no-loss/no-gain basis, with effect from 1 January 2006.

b) Report of the Advisory Committee on Post Adjustment Questions (ACPAQ)

12. The Commission reviewed the report of ACPAQ on its twenty-seventh session, held in New York from 17 to 25 January 2005. The report included the Committee’s review, including recommendations on methodological issues of the post adjustment index calculations and preparatory activities relating to the next round of pace-to-place surveys planned for 2005 at headquarters duty stations and Washington, D.C. The Committee’s recommendations covered all the methodological and practical aspects of conducting place-to-place surveys. It also provided some guidelines regarding further studies to be carried out by the ICSC secretariat with respect to product comparability and analyses of rent data from staff and external sources.

13. The Commission endorsed the recommendations of the Advisory Committee as contained in its report on its twenty-seventh session.

Conditions of service of General Service and other locally recruited staff

a) Survey of best prevailing conditions of employment in Paris

14. Under article 12, paragraph 1, of its statute, the Commission had conducted a survey of best prevailing conditions of employment for the General Service and related categories of staff in Paris. The Commission recommended to the Paris-based organizations a new salary scale that was 1.19 per cent higher than the current scale.

Conditions of service applicable to both categories of staff

a) Mission subsistence allowance

15. The Commission took note with satisfaction of the report of a working group of the Human Resources Network, which provided detailed information on the practices of common system organizations relating to entitlements of staff serving in non-family duty stations and their ongoing efforts to harmonize the entitlements where operational requirements permitted.

16. The Commission considered that certain additional questions needed to be addressed before a final decision on the question could be taken. It, therefore, requested the organizations to present to it at its sixty-first session, in coordination with and through its secretariat, additional information, including:

1. the specific rationale for maintaining separately the special operations approach and mission subsistence allowance for staff at non-family locations versus introducing a single, uniform system-wide arrangement;
2. an itemized tabular comparison of the various remuneration elements received under the special operations approach and mission allowance, as well as specific examples showing how the remuneration package under each approach is calculated;
3. the number of locations at which more than one of the approaches could be applicable at the same time to staff of different organizations.

17. The Commission also requested its secretariat to present to it at its next session the financial implications of the proposed change in the basis for calculating special operations living allowance rates exclusively on the basis of the after-6o-days daily subsistence allowance.

B. CHANGES IN SALARY SCALES AND ALLOWANCES

Professional and Higher Categories

a) Post adjustment matters

18. The following levels for the Rome post adjustment classification, showing the fluctuations of the post adjustment multiplier relative to changes in the rate of exchange were announced by the International Civil Service Commission (ICSC) from July 2004 to June 2005. Changes in the multiplier were for the most part due to currency fluctuation only.

19. In January 2005, pursuant to the General Assembly resolution A/RES/59/269, the base/floor salary scale for the Professional and higher categories of staff was adjusted upward by 1.88 per cent reflecting a consolidation of 1.88 per cent of the post adjustment on a “no-gain, no-loss” basis.

20. In June 2005, in accordance with the 5%/twelve month rule, the post adjustment multiplier was revised to 46.4 (at the rate of exchange of € 0.830 to US$ 1) to reflect the accrued increase in the Rome cost-of-living index in the preceding twelve months.

TABLE 1

General Service Category

21. A comprehensive salary survey of the best prevailing conditions of employment for the General Service and related categories of staff in Rome will be conducted by the ICSC in November 2005.

II. UNITED NATIONS JOINT STAFF PENSION BOARD (UNJSPB)

22. The United Nations Joint Staff Pension Board (UNJSPB) held its 188th Standing Committee session from 5 – 8 July 2005 in New York, USA. Among the issues on the agenda of the Standing Committee were:

1. A review of the actuarial methodology and assumptions for the twenty-eighth actuarial valuation of the Fund as of 31 December 2005;
2. The report of the Representative of the UN Secretary General on Management of the Pension Fund investments
3. The Financial Statements of the Pension Fund for the year ended 31 December 2004 and the relating Operations Statistics.

A. ACTUARIAL METHODOLOGY AND ASSUMPTIONS

23. After reviewing the report of the Committee of Actuaries on the actuarial methodology and assumptions for the twenty-eighth actuarial valuation of the Fund as of 31 December 2005, the Standing Committee agreed with the recommendation of the Committee of Actuaries to maintain the same demographic assumptions as had been used in the valuation as of 31 December 2003 subject to following changes:

1. a reduction in the tabular rates of withdrawal for men in the professional staff by 15 per cent for all periods of service,
2. a reduction in the tabular rates of withdrawal for women in the professional staff by 15 per cent for the first three years of service,
3. an increase in the tabular rates of withdrawal for men in the general service category by 20 per cent for participants with more than three years of service, and
4. an increase in the tabular rates of withdrawal for women in the general service category by 10 per cent for participants with more than three years of service.

24. The Standing Committee agreed to the recommendation of the Committee of Actuaries that the real rates of return of 3 per cent, 3.5 per cent and 4 per cent should continue to be used in the actuarial valuation as of 31 December 2005, with the 3.5 per cent return being designated as the basis of the Regular Valuation. The Committee further agreed to retain the inflation assumption of 4 per cent per annum.

25. Regarding growth in the future number of active participants, the Standing Committee agreed to the recommendation of the Committee of Actuaries that the 31 December 2005 actuarial valuation should be conducted with three sets of assumptions: 0.5% growth per annum for 10 years, followed by zero growth thereafter; zero growth for all years; 1.0% growth per annum for 10 years, followed by zero growth thereafter.

26. In noting the recommendation of the Committee of Actuaries that the present asset valuation methodology should be retained, the Standing Committee asked the Consulting Actuary to calculate the asset valuation using alternative methods as background and information for reviewing the results of the Regular Valuation and keep under consideration the possible use of alternative methodologies in future valuations.

B. REPORT OF THE UN SECRETARY-GENERAL REPRESENTATIVE ON THE INVESTMENTS OF THE FUND

27. The Standing Committee reviewed a report by the Representative of the UN Secretary-General titled Management of the Investments. The report, prepared for the information of the Standing Committee, summarized the economic and financial environment and investment return of the Fund during the period under 1 April 2004 to 31 March 2005.

28. The market value of the assets of the Fund increased to US$29 252 million on 31 March 2005 from US$26 589 million one year earlier, an increase of US$2 644 million, or 10.4 per cent. The total investment real return for the period under review was 7.3 per cent.

29. The Fund’s investments are allocated into four categories (bonds, equities, real estate and short-term investments). The rates of return of the four categories for the reported year ending 31 March 2005 were as follows:

30. The report stated that the management of the investments of the Fund has over the years applied strategy and tactical moves geared to achieving good returns over longer periods of at least five years. Figure 1 below shows the moving cumulative rate of return for five year periods ending 31 March 2005.

31. Although the Fund’s return of 10.4% outperformed the benchmark return of 8.9%, the report pointed that the moving annualized rate of return for five year period ending 31 March 2005 is 3.2% down from 4.6% in March 2004. This is primarily due to negative rate of returns in the years 2001 and 2003.

Financial Statements of the UNJSPF and Operations Statistics for the year ended 31 December 2004

32. The Standing Committee examined and took note of the unaudited financial statements on the operations of the Fund for the year ended 31 December 2004 (ref. FC 110/23 Add.1, available from the United Nations in English and French only). The 2004-2005 statements, which are audited only at the end of each biennium, will be presented to the UN Joint Staff Pension Board in its next meeting scheduled to be held in July 2006 in Nairobi, Kenya.

¹ Index of cost-of-living for international officials in Rome. Please note that the index has been re-based effective 1 October 2000, date of the last cost-of-living survey