Since the early 1990s, the World Bank has been providing policy advice to its member countries on the design of pension systems. The advice emphasizes flexibility of system design within a broad five-pillar conceptual framework, customized for individual country conditions and placing substantial importance on the key principles of affordability and sustainability.

Treasury supports this work, through the Pension Investment Partnerships (PIP) program, which assists funded official sector pension and social security schemes in our member countries to strengthen their investment management infrastructure and operations, thereby making these pension and social security schemes more sustainable. Treasury draws on its experience, skills and knowledge accumulated through managing about USD 15 billion in pension assets ranging from global equities and fixed income to private equity, hedge funds and real estate over the past 50 years. Treasury also manages over USD 60 billion in reserves and other assets in-house, allowing it access to a wealth of expertise, industry contacts, market information, and financial technology.

Recognizing the impact that governance has historically had on the performance of such schemes, PIP can advise plan sponsors on governance structures customized to the specific parameters of their scheme, which align the incentives of fiduciaries with those of multiple stakeholders and ensure transparency of and accountability for results. As part of advising on appropriate investment policy within an asset-liability context, PIP can also assist pension funds in evaluating existing levels of depth and liquidity in domestic financial markets and asset classes, appropriate investment avenues for pension assets and alternatives that could be created, international investment options, and innovative ways to manage currency risk issues that inevitably arise in such instances. PIP can also assist in educating policymakers on the implicit costs of the legal and political constraints that frequently characterize the investment of pension assets.

Possible subjects for training and advice (customized in each case to the client’s circumstances) may include:

Governance structures and Plan objectives

Asset-Liability management and foreign exchange risk management

Investment policy, including domestic versus foreign assets

Designing appropriate benchmarks for domestic asset classes

Outsourcing policy, and selecting and managing investment managers

Risk budget and tools for measuring, attributing, and allocating risk

Capacity building in financial systems and human resources

Communicating with multiple stakeholders, including employees, employers, pensioners, regulators, and government

Benefits administration infrastructure

 

For more information on Treasury's capacity building technical assistance to Pension Funds on investment management issues, please contact Mr. Sudhir Rajkumar, Head, Pension Investment Partnerships via srajkumar@worldbank.org