Transparency in the Investments of the Palestinian Pension Authority Fund, 2025

·        One of us asks... is the financial independence of the Palestinian Pension Authority strong? The answer according to our readings and our review of reports on this subject... no, for several reasons, the most important of which are: irregular transfer of government entitlements, and the accumulation of debt by the Ministry of Finance.. where the investment environment there is high-risk.. and other reasons which will be mentioned later in the body of the post!

·        I reviewed a publication under the above title, issued by "the Coalition for integrity and accountability (AMAN). 2025 Transparency in the investments of the Fund of the Palestinian Pension Authority. Ramallah – Palestine," in which the report discusses the reality of transparency in the management of the investment funds of the Palestinian Pension Authority, in light of the legislative framework governing the Authority’s work, and based on international best practices in pension fund governance. It aims to assess the Authority’s adherence to the principles of transparency and disclosure, identify existing gaps, and provide practical recommendations to strengthen accountability and protect the funds of contributors.

·        The report referred to the legislative framework that regulates the work of the Palestinian Pension Authority, explaining that it comprises the General Pension Law No. (7) of 2005, and the Financial Regulations of the Pension Authority (Cabinet Decision No. (4) of 2017 issued on 30-5-2017), as this framework regulates the process of investing the fund’s money and grants the Authority administrative and financial independence, with clear roles defined for the Board of Directors, and the Investment and Audit Committees, and the Investment Director, and the custodian (the term applied to the bank or financial institution appointed by the Authority’s Board of Directors to hold and manage the Authority’s funds and assets in accordance with the Board of Directors’ instructions). The law also obliges the Authority to prepare annual and quarterly reports, and to disclose investment performance, risks, and conflicts of interest, and the report concludes that the fundamental problem does not lie in weak legal texts, but in the limited implementation and enforcement of them!

·        The reality of investments in the Palestinian Pension Authority:

·         The investment portfolio of the Pension Authority is estimated at about 1.2 billion dollars, distributed between local and foreign investments including government bonds, stakes in companies and banks, and investment projects. The Authority operates in a high-risk environment, due to the irregular transfer of government entitlements, the accumulation of debt by the Ministry of Finance, and the overlap of roles in paying pension salaries, which weakened the financial independence of the exhausted fund and affected long-term investment planning!

·         Results of the assessment of transparency in the Authority’s investments:

·         The assessment, based on open sources and audit and international reports, showed a fundamental shortcoming in the level of transparency, which is manifested in:

• Absence of publication of the annual and quarterly financial statements and investment reports.
• Unavailability of a declared investment policy that explains the objectives, asset allocation and risks.
• Poor disclosure of the performance of investment portfolios and of returns and losses.
• Limited disclosure of conflicts of interest, with possible indicators of such in some investments.
• Poor communication with contributors and failure to provide them with periodic reports on the fund’s status.

·         General conclusion of the report:

·         The report concludes that there is a clear gap between the legislative framework governing the investments of the Pension Authority and actual practices, where transparency and disclosure remain below the required level. This reality weakens official and societal oversight, and reduces the ability of contributors (the employees affiliated with the General Pension system to which the law applies) and stakeholders to assess the soundness of the management of their pension funds!

·         A crisis in governance of the Authority’s investment context, this is evident from the absence of a clear and declared investment policy that explains the investment objectives, linked to a precise planning framework, and specifies asset allocation in a transparent manner. Despite the presence of sufficient investment expertise on the Board of Directors in terms of number, the study did not find evidence indicating protection of the Authority’s investments from conflicts of interest, especially as a number of experts hold supervisory or senior positions in investment companies that have an investment relationship with the Authority; such as Al-Quds Pharmaceutical Industries Company, in addition to the lack of adopted disclosure forms (notes of the State Audit and Administrative Control Bureau (SAACB) in its annual report for 2020)!

·         Absence of disclosure (at the level of mechanisms and administrative behavior): The Authority does not disclose its investment managers or advisors while announcing the banking institution that manages the investments, yet the selection mechanisms, remuneration, and the nature of contracts are not announced or available. The Authority also does not disclose risk management strategies to protect assets, nor does it publish its “quarterly and annual” reports which the law obliges it to publish, on its website!

·         However, at the complaints level, although there is a complaints page on the Authority’s website, this page lacks mechanisms or a protocol for handling complaints and their follow-up paths. The Authority also does not disclose any investments made with parties or entities related to the fund, and this extends as well to loans or financial facilities granted to or received by the fund, and the nature of their connection to parties related to the fund! It should be noted that according to Article 22 of Chapter Two in Part Three of the law, the Authority is obliged to provide its contributor with statements that include the account balance and the distribution of investments in the account as of the last day of the quarter under review!

·         Additionally, Article 62 of the law indicates the necessity that “the Chairperson of the Authority informs contributors, at the beginning of each fiscal year, of the necessity to review the investment avenues in which they prefer to invest their money, and to inform the Authority in case of a desire to change priorities.”! This article indicates that the contributor is a partner in the investment process, and that investment planning is carried out by a participatory approach, with clear and specific disclosure and publication policies! However, the website lacks investment statements, and the Authority has not updated its reports, including the annual report, on the website since 2014, and the request to obtain investment statements, including financial reports and asset allocation, passes through bureaucratic procedures requiring the approval of the Chairperson of the Authority, which makes contributors’ access to these statements complicated!

·         Absence of binding oversight: the report concludes that binding oversight is absent by a supreme regulatory institution such as the "State Audit and Administrative Control Bureau (SAACB)" for example, and despite the Authority and its investment branch being subject to the Bureau’s oversight, this oversight is non-periodic, as the last report prepared by the Bureau was in 2020. Also the availability of the results of these reports is limited and non-detailed. As for the Pension Authority, it does not publish its annual reports, and confines itself to delivering them to the Chairperson and the Prime Minister and provides limited access, documenting that with press releases devoid of details!, while the law does not contain clear accountability mechanisms for the Board of Directors, and thus lacks important and necessary mechanisms in light of the sensitive investment role played by the Board

·         Decline in relations with the public: over the past five years the Authority’s relationship with the public has declined in terms of media and detailed publication, as the Authority’s website lacks any updated news about the Authority’s activities and its investment work statements, and the website has not been supplemented with any news or material related to investment since 2023!

·         Main recommendations The report recommends the necessity to:

• Publish the annual and quarterly reports and investment reports regularly and make them available to the public.
• Adopt and publish a clear and declared investment policy.
• Enhance disclosure of conflicts of interest and mechanisms to prevent and address them.
• Empower audit and oversight committees and ensure their independence.
• Develop transparent and regular communication channels with contributors to enhance trust and accountability