1. Lifting FNPF Performance to Build a Stronger Pacific Community PACIFIC PROVIDENT FUND & SOCIAL SECURITY CEO FORUM - PORT MORESBY 22 nd -24 th, AUGUST 2011

2. PRESENTATION OUTLINE ▪ FNPF Reform Program ▪ Key Reform Projects: i) Pension Reform ii)New FNPF Act iii)Rehabilitation of Investment iv) Business Process Re-engineering v) IT Reform ▪ Lessons Learnt

3. FNPF REFORM PROGRAM 2010 – 2013 Core Objectives i) Ensure the future sustainability and solvency of the Fund ii) Ensure deliverance of excellent services to its Stakeholders iii) Optimize and Grow the Investment

4. REFORM PROJECTS: 2010 - 2013 To Achieve the Core Objectives Requires Comprehensive Reform on a number of fronts Pension Review of the FNPF Act Contribution, Collection & Coverage Review of Withdrawal Grounds External Financial Literacy Structural Reforms Operational Reforms Information Technology Review Business Process Re-engineering Strengthening Training & Capabilities Performance Management Review Leadership Group Shared Services & CG Rehabilitation of Investment Projects

5. PENSION REFORM ▪ Objective - To address growing solvency gap and financial stability of the current scheme.

6. CURRENT OPERATION CONTRIBUTION PENSION  Members build up retirement savings ▪ Low retirement balances due to access to pre- retirement benefits ▪ Majority opt for Full Lump Sum withdrawal at retirement. ▪ High percentage don’t benefit from Pension Buffer Reserve (PBR) contributed to.  Pension payment is more than pension income  Negative annual Net Pension continue to reduce the PBR. ▪ PBR will be used up in 3-4 years, shortfall will be then be met from GR. ▪ Based on WB – GR will exhaust by 2056

7. PENSION REFORM i)Adopt ‘age-based’ actuarial pension conversion rate. ii) Separate Business by Function: ♦ Contribution and Pension ♦ Allocating assets to support existing pension liabilities & ♦ Explore how all can share in the burden of ensuring the system is sustainable EQUITABLE SOLUTIONS

8. ESTABLISH TWO PENSION FUNDS Closed Pension Fund ♦ Existing Pensioners ♦ Allocate $536.18m assets to support liabilities Pension Fund EQUITABLE SOLUTIONS ♦New Pensioners ♦Adopt fair actuarial rates ♦Sustain itself

9. NEW FNPF LEGISLATION ♦ FNPF Retirement Savings Policy and Scheme administered under the FNPF Act based on design and laws developed in the early 1960’s. ♦ Key objective of the Scheme : Provide financial security in retirement ;but ♦ Not appropriately covered under under current law and administrative arrangements

10. NEW FNPF LEGISLATION ♦ RE-FOCUS FNPF BACK TO ITS ORIGINAL OBJECTIVE BY; i)Reduction of pre-retirement withdrawal grounds. ii)Reserving 70% of members’ contribution for retirement through their Preserved Account and 30% Pre-Retirement withdrawals iii)Offer additional retirement products; Account based Pension & Term Annuity. iv)Maximizing coverage of the Scheme by alignment to Fiji’s tax office legislation and enhancing powers and penalties for collection. v) Emphasis on FNPF role in promoting retirement planning education.

11. NEW FNPF LEGISLATION ♦ IMPROVING GOVERNANCE – THE BOARD i)Charging directors with clear responsibilities – Members interest are paramount ii)Board members to have the right skills, qualification and experience to govern the Fund iii) Appointment terms that do not align with political terms. iv) Appointment of independent Board Members; v)Fit and proper person criteria imposed by the Reserve Bank of Fiji (RBF).

12. NEW FNPF LEGISLATION ♦ IMPROVE REPORTING i) Strong Supervision structure ◘ Explicit recognition that RBF has the role of prudential supervision of the Board and its operations. ◘ Key actions require RBF approval / actuarial sign off. ◘ Comprehensive set of supervisory tools and requirements to use as follows: i)Examinations and on-site inspections, ii)Financial condition reports, iii)Strong reporting requirements to RBF from actuary/auditor. iv)Powers to give directions to Board. ii) Reporting to Members ◘ Additional disclosure requirements ◘ Exploring release of half yearly results.

13. INVESTMENT PORTFOLIO-JANUARY 2010 ♦ 99% in Tourism Projects. ♦ All start up projects.

14. FNPF POSITION WITH REGARDS TO NPI’S 1.Long-term investor 2.Weakness as sole tourism developer 3.Not the best market condition to divest 4.National interest to develop these assets 5.Need to recover loses over time

15. STRATEGY – SOFT LANDING 1.Take the losses off the books (FY09) 2.Quarantine and work out the Non-Performing assets 3.Actively manage these assets – Joint Venture, create value, divest etc 4.To recover and write-back these losses into the books over time. Diversification – to work with RBF

16. REHABILITATION OF INVESTMENT PROJECTS- PRELIMINARY RESULTS GRAND PACIFIC HOTELJoint venture with Lamana & NasFund NATADOLA HOTEL PROJECTWork closely with our Hotel Operators to improve financial performance of Hotel Debt re-structure completed $100m to be serviced at 8% starting in July - $667k monthly New valuation completed with increase in value by 21%. Expected to write back $17m. Residential lots development undertaken MOMIGoing ahead to complete – still open for JV New Design

17. BUSINESS PROCESS RE-EGINEERING ▪ Objective 2: To deliver excellent services to our stakeholders.

18. BUSINESS PROCESS RE-ENGINEERING Value added processes Improved customer satisfaction Make better use of members funds More productive use of staff Managers time freed to focus on strategic goals Improve staff morale Cost efficient processes Sustainability in the way we operate

19. Simple Processes That are fast, accurate, and efficient (BPR) Customer Service that is responsive, convenient, and reliable (CS Training) ACHIEVED THROUGH Empowered People who are motivated and skilled to deliver (Leadership Training) Supported by Through BUSINESS PROCESS RE-ENGINEERING

20. ♦ Introduction of Customer Service Standards. ♦ Supported by Service Level Agreements between Departments to deliver what we promise.

21. IT REFORM Current IT System to be replaced New Admin Platform: –To be implemented along with process improvements –Utilizing concepts such BPM, Workflow, Business Intelligence –To secure members & employers future

22. DATA MANAGEMENT Data Management Started with Data Cleansing –Ensures only one single source of truth –Providing data consistency –Improving data quality & integrity –Detecting fraud –Reducing unauthorized access

23. CUSTOMER RELATIONSHIP MANAGEMENT Utilizing technology to deliver excellent customer services –Remove long queues –Increase customer reach –Reduce cost –Reduce turnaround times –Modernize the fund Build relationship with our Members

24. WEB, INTRANET, INTERNET, ONLINE Utilizing the most powerful tool ever created … the cloud The Cloud: –Removes long queues –Increases customer reach –Reduces cost –Reduces turnaround times –Modernizes the fund

25. LESSONS LEARNT

26. LESSONS LEARNT ♦ Culture Change (comfort zone to now…) ♦ Several Reform Projects being carried out at the same time – requires good planning and constant monitoring ♦ Strong leadership – to push the Reform agenda ♦ Staff Capability – Retain staff, recruit staff with required skills set ♦ Constant Communication to Staff and Stakeholders ♦ Continuous consultation on key reform initiatives - stakeholders ♦ Change Management Division reporting directly to CEO ♦ Communicate the small/big gains/achievements to staff/stakeholders ♦ Reward people (does not have to be monetary)

27. WAY FORWARD ♦ New FNPF Act to be accented by end of 2011 ♦ Drive Organization Change with new structure to be in place by end of 2011. ♦ IT Reform implementation starts FY 2012 ♦ Wrap Up Reform by FY 2013 ♦ Review by FY 2014

28. Thank You