Occupational funds for the professions in the Netherlands normally do not attract a lot of attention. But last year’s troubles at the top of the E11bn SBA Artsenpensioenfondsen, which saw three executives leave in a matter of three months, put the funds back into the spotlight.
The professional funds have always stood apart from other pension funds in the Netherlands. Representing the ‘liberal’ professions, the occupational funds for the professions are run by, with and for members of various professions - ranging from doctors, dentists and pharmacists to musicians, registered ship pilots, midwives and notaries. Quite a difference from most other pension funds, where employers and employees also take part in the decision-making process.

BPR law to change
The 11 different occupational schemes – consisting of a total of 60,000 participants – are represented by an association called UvB. The existing general pension law does not apply to the funds. Instead, they currently resort under the BPR law. But all of that is about to change.
“The new pensions law will cover all pension funds, including the occupational funds,” says Geert van Til, partner at KPMG Financial Services and the firm’s pensions expert. Both Van Til and his colleague Edward Snieder, who is a senior manager and advisory expert at KPMG, say it is important to understand occupational funds are very different from industry-wide funds and corporate pension funds.
“The Polder Model is less important when it comes to occupational funds,” says Van Til. “There are no employers and employees involved. Occupational funds are essentially gatherings of independent entrepreneurs and professionals, who are used to taking their own decisions about their financial future.”
Following the departure of the chief executive and two other top executives last year, SBA Artsenpensioenfondsen, which is the foundation for joint administration of the SPH fund for general practitioners and the SPMS fund for medical specialists, pushed through some radical changes.
In order to comply with changes in pension fund governance, SBA is splitting its activities into a board that sets policy, and a separate company looking after administrative and asset management. The changes are to be implemented in the spring.
A few weeks after the resignations became public, SBA announced a radical overhaul of its investment strategy, implementing a ‘passive management strategy’ for its pan-European and US large-cap equity portfolios, which represents almost E4bn of its total portfolio of e11bn .
In practice, this meant SBA put its internal managed equity portfolios on an indexed basis, essentially making its five-strong equity team obsolete. The fund is now benchmarking the portfolios to MSCI. SBA said an “upgrade of investment policy” was the main driver behind the decision. Apart from pension fund governance, how will the new supervisory framework for pension funds and insurers (FTK) affect the SPH and SPMS funds? “It could lead to more work and higher costs,” says a spokesman for both funds, referring to the valuation of the funds’ liabilities at market value and the managing of the equilibrium between assets on the one side and liabilities on the other side.
SBA manages 11bn euros in assets for the doctors’ and medical specialists’ funds. Some 44% of that is invested in equities. Will FTK lead to changes in the asset mix? “It is too difficult to tell what the influence of FTK on our asset mix will be. But we are currently looking at it,” the spokesman says.

Pharmacists and FTK
Compared to the seismic changes at the SBA, things have been much calmer over at the SPA pharmacists fund, although its director, Anton van Zijl, is not exactly pleased with some of the changes. “The government is asking a lot from us, too much in my opinion,” he says.
His E820m fund represents some 1,600 pharmacies and a total of 2,700 pharmacists. Van Zijl says the implementation of FTK comes at a “particularly bad” moment. “I understand the government would like to set some rules, because it makes everything much clearer for all the parties concerned. But I do think they are quite rigid when it comes to certain aspects. For example, we have to predict what our coverage ratio will be for the next 15 years. But no one can look 15 years ahead, it is impossible.”
Van Zijl fears the implementation of FTK will lead to higher costs of running the SPA fund. “Let’s say we do give out a 15-year forecast for our coverage ratio. If we get it wrong, which would not be unlikely, we have to be able to explain why. This means having to hire consultants etcetera, which will increase the costs. It is
ridiculous. More control and transparency are a good thing, but this is going too far.”
The FTK will also have implications for the funds’ asset mix,
currently made up of 25% equities, 70% fixed income and 5% real estate. In the future, Van Zijl
predicts the fund’s real estate
holdings will rise to 10%, with less involvement in equities and bonds.
The creation of a new pensions law is another development Van Zijl is following with close interest. “The new pensions law is to replace all the current pension laws. It sounds great on paper, but in
practice it is not so simple. Occupational funds are very different from industry-wide and corporate pension funds. But for some reason, it is very hard to bring this point across to the civil servants and MPs involved in making the new law in The Hague.”
There are two things in the new law Van Zijl strongly disagrees with. First, the introduction of an average premium contribution. “Average premiums are fine if you are a corporate or industry-wide fund, with an employee-employer relationship. But you cannot ask participants in an occupational fund to start paying average
premiums, because that would actually mean you are shifting money from one independent small business owner to the other,” he says.
The second point Van Zijl strongly disagrees with is the
introduction of a brand new
‘pension fund body’ for each profession, with the sole purpose of ascertaining, every five years, whether all the participants still want an obligatory scheme. “This essentially make our current
association superfluous. It is just incredible. By creating an extra pension body, you just create
more work and more confusion for everyone involved. It was clearly made up by stupid civil servants,” he says.

Funds losing out
Van Zijl fears the new pensions law, which is to be implemented at around 2009, will make life for the occupational funds a lot more complicated. “Think of it, our current law has 45 articles, whereas the new one already has 80. All this law will do is increase costs, instead of making things more transparent and self-regulated.”
“Occupational funds are losing out to the industry-wide and corporate funds in The Hague when it comes to pushing their agendas through,” say Van Til and Snieder of KPMG Financial Services. “In the Dutch political arena, the social partners are hugely important,” says Van Til. So when it comes to making new pension laws, the
government tends to look at pension funds from the perspective
of either the employer or the employee, instead of a small
business owner or independent professional.
Both KPMG experts also share Van Zijl’s opinion on the creation of a new pension fund body. “It is not clear to us what extra value this new body will bring to the industry,” Snieder says.
But according to Van Til and Snieder, next to FTK, the most crucial aspect to come out of the new pensions law is communications. “By making scheme participation obligatory for occupational funds, the funds will have to communicate to their participants in a crystal-clear manner what exactly their policies are and why they are taking certain decisions. In other words, what is their policy when it comes to indexation? Will they be able to index future pension obligations, for example, and why? What will happen if the coverage ratio changes? Will costs increase? In other words, participants will be getting a much clearer picture of what it is they are getting out of their pension scheme,” says Van Til.
Will the need to improve communications lead to higher costs for the funds? “Yes,” say Van Til and Snieder, “but nothing earth-shattering”. “The main consequence of this new law is that occupational funds will have to show their participants they are doing a good job,” Snieder says.

Dentists close to relaunch
Bert van de Belt, director of the E1.2bn Pension Fund for Dentists, has been communicating a lot with his participants recently. In what is generally seen as a unique exercise for a pension fund, the dentists’ fund is currently in the middle of relaunching.
The fund, which covers around 6,000 deferred pensioners and 1,200 pensioners, has been run as a closed fund for the past eight years, ceasing to take on new contributions since 1996. Last year, the fund decided to approach all members of the dental profession in the
Netherlands to see if they wanted to re-activate the fund.
After consulting the majority of the country’s dentists, between 50% and 60% voted in favour of a relaunch. Not a bad feat, considering the fact there are between 8,000 and 9,000 dentists in the country, and there are no unions or trade associations involved.
“The average participant in an occupational fund is much more critical than participants in other funds,” says Snieder of KMPG. “These people are usually very highly educated, with a large
number of them actually running their own businesses. As a result, they will look at a pension fund in a much more critical manner than, say, somebody working in the building sector or hospitality
business. Therefore, the product the occupational funds offer to their participants must be very good and add value, or else the
participants will do it themselves.”
Unfortunately, the outcome of Van de Belt’s campaign came in just a little too short for an immediate relaunch. “The outcome is just under the critical benchmark of 60%, so we are currently in talks with the Ministry of Social Affairs,” he says. The talks are focusing on representation. “In other words, in how far do we serve the interests of the whole profession,” says Van de Belt. If Social Affairs deems the representation to be satisfactory, the relaunch is to go ahead “in the next few months”.
If a majority of dentists choose to make contributions, the scheme could then be made mandatory for the whole profession. Van de Belt says nothing has been decided about that. If anything, surely the dentists could be persuaded by the excellent performance of the fund. In the time the fund has been closed, assets have doubled to E1.2bn.
Van Til and Snieder think it will be a good thing for the dentists fund to reactivate. “Although most people in the liberal professions are focused on running their businesses, having a communal pension fund can be a good thing. It keeps the professions together as a group, and will also allow people to get a better scheme because a pension fund will have stronger buying power than the one individual. Dentists or doctors are, after all, no pension experts or professional investors,” says Van Til.