NETHERLANDS - The €5bn occupational pension for medical consultants SPMS will guarantee its participants a yearly indexation of at least 3%, it has announced.
The decision - the first of its kind for occupational schemes - is designed to create a level playing field with other schemes on the transfer of funds, when participants move between pension schemes, said Jeroen Steenvoorden, executive of SPMS.
"The new rules on value transfer for occupational schemes don't allow the potential of conditional indexation taken into account. As a result, leaving participants will take too little funds with them," Steenvoorden explained.
"The opposite applies to new participants. They fully share the indexation and profits, without bringing in sufficient funds from their previous pensions provider. This would happen at the expense of the future indexation of all participants," he added.
The value transfer is a particular problem at SPMS, as it considers it undesirable to have younger colleagues financially supporting the older generation, the scheme indicated. This is why it has chosen to implement a modest pension build-up combined with a high indexation and profit-sharing.
The scheme has this year granted its participants a total indexation of 5%. After taking the new guarantee into account, SPMS still has a coverage ratio of 160% at present. The average total indexation has been 7% during the last three decades.
"Given our funding ratio, and the lack of a shortfall in our financial reserves, I don't expect any objections from regulator De Nederlandsche Bank against our indexation decision," Steenvoorden commented to IPE.
The consultants' scheme reported total returns on investment of 8.7%, with property - generating a 27.1% return - being the best returning asset class. Equity and fixed income returned 11.1% and -1.6% respectively while hedging of the main currencies contributed 2.8% to the total return.
SPMS has introduced alternative investments as a new asset class, allocating 10% of its strategic asset mix to absolute return investments, such as hedge funds and global tactical asset allocation.
According to the pension fund, 70% of its self-employed members have also joined the occupational association.
"This clearly shows their support for an occupational plan, and assures the continuation of the mandatory scheme," it concluded.
The requirement of an occupational association follows new legislation on mandatory occupational pension funds which means the association decides on the main features of the scheme and is also involved in its supervision.
SPMS manages the pension scheme of 7,000 self-employed medical consultants and has 5,000 pensioners.