The investment assumptions used in determining the investment strategy of the social security institution are fit for purpose. These assumptions will include assumptions for return, risk and correlation, and other factors as appropriate. Assumptions are considered over a suitable time frame (typically long term) to ensure the output of any modelling is consistent with the time horizon of the mission and goals of the social security institution.

In setting the objectives of the social security institution, the board considers the role of socially responsible investing (SRI) and environmental, social and corporate governance (ESG) to ensure the investment policy and strategy are consistent with the mission (where the mission includes elements of SRI and ESG).

This objective applies to both an internal investment institution and an external investment manager.

For social security institutions that have an investment mandate, legislation, policy or decree may establish the general direction of the investment policy and prescribe the types of allowed investment instruments. Any legal or regulatory restriction is documented and incorporated into the social security institution’s investment mission and strategy or appropriately communicated to external investment managers.

The investment process is framed by reference to a risk budget aligned to the investment.

Investment decisions take into account the nature of the liabilities of the social security institution. In particular, investment strategy reflects the level, timing and nature of liability cash flows and the predictability of such future payment obligations.

This part of the guidelines refers to the processes that the investing institution must put into place to meet governance requirements and ultimately meet its investment objectives. These processes apply whether the investment itself is carried out by an internal investment unit or an external manager.

The investment structure and organization of the investing institution is consistent with the legislation, decree or official act of government which established the social security institution, the ISSA Guidelines on Good Governance, the ISSA Guidelines on Investment of Social Security Funds and industry best practice for investments.

The board and management have a fiduciary duty in administering and managing the funds of the social security institution.

Investment functions will be undertaken by different bodies or institutions. In order for the governance process to be effective, the roles and responsibilities of each body and how these interact will be clearly defined and communicated.

It is important that the way the bodies responsible for the investment process are set up and interact ensures that the investment governance process can be carried out effectively and in line with objectives.

The bodies and their roles and responsibilities need to be defined clearly. How the bodies work together and interact is also important to ensure coordination in the duties undertaken and that governance objectives are ultimately met.