Mahbuba Abdulloeva Sunil Kumar Sumeet Thakkar Maja Vuckovic Krcmar
Author Co-author Co-author Co-author
EN
LOCAL AGENT PROVIDENT FUND - EXPECTATIONS DASHED AND LIVELIHOODS AFFECTED
The LA Provident Fund (LAPF) was designed and intended to serve as a financial safety net for Local Agents who serve in a range of countries where social protection is scarce or even inexistent. The LAPF aims to provide LAs in Delegations with a reliable source of income, and a more comfortable retirement when leaving the service and after serving the organisation for several years with loyalty and professionalism.
The LAPF therefore plays a crucial role in safeguarding the financial stability of LAs. For some colleagues, the Fund may not be a primary scheme, yet even when national schemes exist, they are often inadequate and insufficient. Some countries where LAs work, have very limited pensions at retirement, which do not enable them to conduct a dignified life.
2022 has been a complex and problematic year for LAs given the volatility of global financial markets and rocketing inflation which has led to price rises for almost all basic commodities. Investments made in the financial market from LAPF contributions, without consultation and agreement of the local agents themselves, have brought negative returns, eating up not only the positive returns of many previous years, but also the employee and employer contributions. Receiving -5.5% on LAPF statements means that HQ did not even secure the committed contribution for all of 2022. Several colleagues left the service with an amount less than the sum of their total contributions during their period of service!
LAs are now legitimately raising serious concerns regarding the investment decisions made by HQ. Doubts circulate as to whether the investment bonds were traded or purchased at a much higher price than their face value, and whether is this why the fund suffered greater losses than foreseen?
Despite claims to the contrary, investment decisions were not taken in agreement with local agents and staff representatives. Staff Committees have clarified to the Administration that staff representatives are not financial experts nor able to provide advice on such matters, nor have they ever submitted any investment proposal to the administration on behalf of the local agents. It is up to the Administration to ensure that the funds under their care are at the very least capital-protected and to assume responsibility for any negative consequences.
Administration must prioritize secure investments over risky operations with potentially higher returns, especially when it comes to a social security fund like the LAPF. While the allure of higher returns may be tempting, it is essential to strike a balance between risk and security.
USHU strongly advocates for transparency, accountability, and regular updates on the fund's performance. We encourage Local Agents to actively engage in discussions, to voice their concerns, and to contribute ideas to ensure that the LA Provident fund remains robust and effective.
Considering the negative returns on deposits, which took effect over the past 4 years (2019 - 2022), USHU believes it is critical now to introduce changes to the LAPF scheme to better allow for a wider range of financial uncertainty and to better secure LA contributions.
USHU proposals include:
1. Freeze investments with the capital of the Provident Fund and maintain Funds in a savings account with HQ bearing the cost of these accounts until a permanent solution is found, which would ensure capital is protected.
2. Consider alternatives with the management of the Provident fund at national level where circumstances permit.
3. Reimburse LAs who have experienced losses when they resigned/retired during the period 2021-2023; devise a mechanism to mitigate any future losses
4. Allow Local Agents to make partial withdrawals from the LAPF if they wish to do so
5. Carry out an audit of/ inquiry into the LA PF investment decisions and consequences. Transparency and accountability are key.
Together, you can help your USHU representatives to engage with the Administration in order to shape a future where financial security is a reality for all Local Agents.
USHU is committed to securing a dignified retirement for all Local Agents
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Meet your EEAS USHU team: Contact us whenever you need support!
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