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Columns November 3, 2011  RSS feed

My Say

World Class Pensions For A World-Class City
by City Comptroller John Liu

New York is one of the world’s financial capitals, and yet our pension investment system exists in an outdated backwater.

Dating from the 19th century, it is unwieldy, inefficient, and heavily politicized. The city’s five pension funds are governed by five separate boards, and no two funds are managed the same. The result is a mess— even as it is responsible for $120 billion in retirement funds for 700,000 hardworking and retired New Yorkers.

Pension Reform NYC will change things. Labor leaders, elected officials, and pension trustees themselves have joined forces to replace this outmoded system with a streamlined structure that will lower pension costs, improve returns on workers’ pension investments, and ensure greater accountability.

It will save money right from the start by in-sourcing the management of certain assets. And, it will save more money over time by focusing on long-term investment decisions, strategic risk management, and all the elements one would expect in a toptier financial center like New York.

Under the plan, the city’s five pension funds would cede authority to a new Pension Investment Board – with representation from municipal employees and the mayor and comptroller— that would set policies and objectives for the system as a whole. The Bureau of Asset Management would move out of the Comptroller’s Office and be reestablished as the NYC Investment Management Company, headed by a Chief Investment Officer whose term would not coincide with any elected official.

This new structure will be more efficient and more nimble—allowing it to increase investment results while lowering taxpayer costs. It is important to note that the biggest driver of pension cost escalation over the past decade has been poor market performance. And amid looming risks of a double-dip in our economy, longterm strategy is more essential than ever.

Full implementation of Pension Reform NYC requires state and city legislative approval. The Comptroller’s Office is committed to working with all stakeholders to shepherd this proposal to fruition in the months to come.

Municipal workers’ and retirees pensions should be entrusted to a modern, professionally managed system that can withstand the volatility and unpredictability of markets for years to come. This is our best chance to create a public pension system that New York City deserves. There is no time to waste.

For more information on Pension Reform NYC, visit www.pirnyc.com