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€11bn Dutch medical consultant scheme not keen on system reform

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SPMS, the €11bn occupational pension fund for self-employed medical consultants, is not desperate for a new pensions contract as part of the reform of the Dutch pensions system, it has said.

In its annual report for 2018, it said that “the ideal pensions contract doesn’t exist” and that, with its fixed inflation compensation of 3%, it already had “excellent pension arrangements”.

In its opinion, replacing average accrual with an age-related degressive one would also not be an improvement, as it considered its fixed indexation already as a form of degressive accrual.

The pension fund said that it would therefore like the option of continuing its existing pension plan alongside any new arrangements. 

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“But of course, we will keep on adjusting to a changing environment,” said Jeroen Steenvoorden, SPMS’s director. “We will base our assessment of new arrangements on the ultimate details.”

In order to increase the sustainability of its existing pension plan, the medical consultants’ scheme has decided to raise its annual contribution of €28,380 by up to 6% while reducing the accrual by 5.1%. It said this would enable its participants to keep on retiring at 65.

Equity overweighting, currency hedge hits

SPMS made a loss of 1.7% on its investments last year, and attributed this in particular to badly performing equities as well as the negative contribution of its currency hedge.

It explained that the 7.4% loss on equities had been boosted by its tactical overweighting of almost three percentage points at the end of September.

Steenvoorden said that the overweighting of equity had been reduced to 0.4% this May, when its equity portfolio comprised 26.9% of its assets.

As a result of its full hedge of the dollar, sterling, and the yen, SPMS lost 4.2% on its currency cover, in particular due to the strong appreciation of the dollar relative to the euro in 2018. In the previous year, the hedge had generated a profit of 5.5%.

Also as a consequence of currency losses, the return of both real estate and hedge funds did not exceed 0.5%, according to the pension fund.

Its 58% fixed income holdings generated 3%. Dutch and German government bonds were the best performing investments, gaining 6.2%.

The pension fund’s infrastructure loans produced 3.5%, said SPMS, adding that it aimed to extend its holdings from 4% to 5%.

Thanks to a 78% cover, the pension fund gained almost 5% on the interest hedge of its liabilities, due to the falling interest rates.

SPMS noted that the interest hedge had even generated a 1% outperformance, as the interest rates on Dutch and German government bonds had dropped faster than the swap rates.

Steenvoorden attributed a 14% drop in asset management costs, to 0.43%, to lower performance fees.

“Last year’s return fell 94 bps short of the benchmark, whereas the outperformance in 2017 was 105 bps,” he explained.

SPMS reported administration costs of €434 per member and transaction costs of 0.21%. The scheme has 8,230 active members, 1,745 deferred members and 7,160 pensioners.

At the end of last May, its funding stood at 125%.

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