North Carolina Retirement Systems’ Assumption Rate Reduced to 7%

The North Carolina Retirement Systems is lowering its investment assumption rate from 7.20% to 7%, a move first proposed 20 years ago.

At the $98 billion fund’s Thursday board meeting, the Teachers’ and State Employees Retirement System and Local Government Employees’ Retirement System’s boards unanimously approved of the decision.

At 88% funded status, the pension system is one of the top five best-funded in the country and the ninth-largest public pension fund in the country. The fund provides retirement benefits for more than 950,000 state and local government workers.

Despite this funded status, the fund has not been able to meet its assumptions in 20 years. Last year, the fund lowered its rate from 7.25% to 7.2%.

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Treasurer Dale Folwell, the sole trustee of the fund, praised the board’s decision, saying that in order to meet future expectations, “realistic assumptions” are needed. “Lowering this assumption will provide the best opportunity to meet the state’s long-term obligations as well as maintain its AAA bond rating,” he said in a statement.

According to the 2016 Asset Allocation Study conducted by the Investment Management Division, the new assumption rate has a more than 50% chance of being achieved over the next 30 years.

The 7% reduction is effective immediately, with changes to employer contribution rates to occur over a three-year period. It is expected that some of these employer contribution rate increases have already transpired under stabilization policies the boards had already adopted in 2016.

Another result of the change is a 2-3% increase in pension plan obligations (both funding and financial reporting), which will also lower the funded status of the affected systems by the same amount.

Tags: Assumption Rate, Dale Folwell, North Carolina Retirement Systems (NCRS), Pension

The United Nations’ $64 billion staff pension fund has been accused of investing approximately $1 billion in companies involved in bribery and major environmental abuses, according to a report from the UK’s Guardian newspaper.

The United Nations Joint Staff Pension Fund (UNJSPF) has nearly $1.5 billion invested in 24 publicly traded companies, according to the report, which said that many of those companies have been implicated in human rights abuses, or in environmental catastrophes, while some are being prosecuted or have already been prosecuted for corrupt practices.

The report says that the fund’s largest investment is a $210 million stake in oil company Shell, which, according to the UN’s own 2011 report cited by the Guardian, was found to be partially responsible for environmental damage from oil spills in Nigeria. It also said the fund holds a combined $244 million in banks HSBC and Barclays, which the Guardian said have been accused of handling covert financial transactions, and have paid hundreds of millions of dollars in fines or settlements.

“These investments clearly undermine the credibility of a well-respected organization,” Thomas Küchenmeister, managing director of watchdog Facing Finance, told the Guardian. “How can I promote sustainable development and the protection of human rights and simultaneously benefit from violations of these?”

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Additionally, the report cited an analysis of the fund’s 10 largest shareholdings by environmental, social, and governance (ESG) ratings agency Sustainalytics, which categorized the investments as either of “significant controversy” or “high controversy.”

However, in response to the accusations, a UN spokesman told CIO that “Sustainalytics does not have access to the details on any of the holdings of the United Nations Joint Staff Pension Fund and did not perform the analysis that is referenced in the article.”

The spokesman added that “Sustainalytics has informed us that it was not contacted by the journalist who wrote the article that appeared in the Guardian to provide a statement or verify any of the information that was included.”

The UN spokesman also said that the UNJSPF doesn’t comment on specific investments, but pointed out that its investment strategy includes ESG considerations.

According to the UNJSPF’s website, the criteria for its investments are set by the UN General Assembly, which has placed restrictions on investments in tobacco and armaments securities, but does not mention fossil fuel investments.

Peter Frankental, director of Amnesty’s UK’s business and human rights program, told the Guardian that there should be a full review of the UNJSPF’s investments.

“These revelations are troubling, because the UN cannot distance itself morally from the activities of its staff pension scheme to which it contributes financially, even if this is an independent body run at arm’s length,” he said. “The secretary general should initiate a full review of the joint staff pension fund to examine how its holdings can become compatible with the United Nations’ vital humanitarian and human rights work.”

Tags: Pension, Sustainalytics, United Nations, United Nations Joint Staff Pension Fund