The pension fund for Dutch medical specialists (SPMS) has increased pensions with an additional 0.7% in 2022 thanks to its high funding ratio. The extra indexation comes on top of the fund’s fixed annual pension increase of 3%.

Today’s record-high inflation did not play a role in the decision to provide more indexation, according to SPMS director Jacques van Dijken.

“The amount of additional indexation we can give is based on the difference between the minimum buffer of 119% that we are required to hold plus 10%, and our funding ratio at the end of the year. We divide this figure by five and pay the resulting amount in additional indexation. That’s how we arrived at 0.7% for this year,” he explained.

In previous years, the fund’s funding ratio never allowed for additional indexation.

The 3.7% indexation may be the highest ever awarded by the fund, and is remarkable for another reason too: SPMS’s retired members will see their purchasing power erode this year for the first time in many years, as annual inflation in the Netherlands’ has averaged more than 10% over the past few months.

SPMS is resisting the temptation to loosen its indexation policy in the light of the rampant inflation.

“We do not see a need to use our buffer to provide more additional indexation. Over the past few years, the 3% annual indexation our members received consistently exceeded inflation by a comfortable margin. It’s a possibility that indexation is incidentally lower than inflation,” Van Dijken noted.

“But inflation is so high now – no pension fund in the world can match that,” he added.

Nevertheless, SPMS strives to provide more additional indexation next year. “If our funding ratio stays at its current level, we should be able to index pensions by an additional 1.5% next year, on top of the regular 3% indexation,” Van Dijken said.

Government plans shed doubt over new accruals

The new Dutch government wants medical specialists to improve their productivity.

According to the government’s coalition agreement, they will have to join hospitals on a contract if they fail to do so. This could have serious consequences for SPMS.

“If medical specialists are to become employees [they are currently self-employed, red], they can no longer accrue pensions at SPMS,” the fund said in its annual report.

It’s yet unclear by which measures medical specialists’ productivity will be judged. “Therefore it’s unclear which improvements need to be made to avert this risk,” it said.

According to SPMS director Jacques van Dijken, SPMS can continue as a closed fund for more than 20 years if accruals stop, without admin costs (now at €499 per member) going up substantially.

“Moreover, costs would actually come down because we would no longer have to shoulder the costs associated with collecting contributions from our members,” Van Dijken noted.

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