The professional pension funds in the Netherlands see themselves as part of the country’s extensive network of second pillar provision. Stichting Pensioensfonds Apothekers (SPA), for pharmacists, is not among the biggest, but is very typical of the schemes that are run by those in the profession for the benefit of the profession.
“It was set up as a professional fund for what we call the ‘outdoor’ pharmacists, those not in hospitals, industry or in government service, who would belong to PGGM, ABP or their industry-wide scheme,” explains Ton van Zijl, the fund’s director. “The scheme is purely for the pharmacist who is self employed, typically running his own shop.” The fund has no full-time employees and outsources all its requirements.
This is the case with van Zijl, who runs his own business in Tilburg in the south of Holland, but also dedicates a portion of his week to SPA. “It is obligatory for anyone who is in the profession in this way to be a member of the fund. This is by law and has nothing to do with the membership of the professional association.”
He adds: “Legally we have our own special niche in pensionland, as the general law regarding pension funds did not apply to the professions.” The fund comes under the BPR law, setting out the regulations for professional pensions provision that came into operation in 1972. This is when the Royal Dutch Pharmacists Association set up SPA, as did the dentists, mid-wives and so on.
But the scheme only covers pharmacists operating on their own or with other qualified pharmacists. So, for example, any staff members will belong to another industry-wide scheme, where van Zijl happens to be chairman of the board. One result is that there is very good contact between the two schemes.
The fund initially had about 1,000 members and since then has grown to 3,500. “The profession has grown in that period, as there are more pharmacies and more pharmacists working in these outlets.” There are about 1.5 pharmacists for each of the 1,500 pharmacies in the country, making up the 2,500 active participants, 400 pensioners and 700 sleepers or deferred members, he adds.
The fund is different to many other schemes in that it is on a defined contribution basis, with members contributing to build up their own pension. They can contribute whatever amount they wish, within limits because it is a tax-approved arrangement, so it is up to each member to keep their contributions within the levels they are allowed for tax purposes. On the other hand, there is a guideline to follow so “if you follow that you are sure to build up a ‘normal’ pension according to your earnings”. Van Zijl explains: “We do not come into this aspect. It’s a private business that our members pay their contribution to the pension scheme according to the tax laws.”
The member is sent a statement once a year for their contribution. The money goes to the fund’s administration set-up, which is outsourced to a Rotterdam-based operation of Nationale Nederlanden (NN), the major Dutch insurer. “We know that the money will be coming in between June and July,” says van Zijl. The contribution inflow comes to about E16m a year and this is growing each year.
When the fund was set up originally it was looked after completely by IMM (ING Investment Management), which ran it on behalf of the fund’s board. “At that point there was an element of reinsurance in the arrangement,” he says. “The insurer looked after the investments and the assets, with our board acting in advisory capacity, but not very actively at the initial stages.”
His own involvement occurred in the early 1990s when he joined the board, at a time when the investments were almost entirely in fixed income. The scheme had a first review after he joined in 1993 and later in 2000. Since 2000 there has been a series of changes to reduce the level of involvement of the insurance company.
Initially, there was a move to equities, which was gradual being in the range of 10 to 15% allocation to equities by the mid-1990s. But at the end of the 1990s, the board looked at the assets more in depth to see what further changes they should make, increasing the equity proportion to 25% of assets. “We are pleased that we did not go any further, given current conditions in the marketplace,” comments van Zijl.
On the equity side, the majority is in European equities, with small exposures in Japan and the Asia-Pacific region, now managed by respectively ING Investment Management, Schroders and Lloyd George (Schroders and Lloyd George since May 2002) on a balanced account basis. A E90m mandate for the US was given to Barclays Global Investors on an indexed basis.
The fixed income making up 74% of the portfolio at the end of 2001 is mainly in European securities, the bulk being in Euroland assets. “We have a portfolio of global bonds managed since 2000 by Rogge Global Partners and by Julius Baer.”
The intention is, overtime, to take more money away from IMM. “We are on the look out for other managers, but not in an aggressive way, as should we wish to change, it can only be in 2005, when we have another contract renewal date with NN, which allows us to place more money elsewhere.”
The fund is now investing in real estate for the first time and has committed E12m to an ING logistic property fund and E9m to an ING English residential fund. “We are now examining extending this to other residential and shop properties, again through funds.” The fund would not invest directly in real estate, only through funds, he points out. At this stage, the fund is not looking at private equity, hedge funds, or even commodities, as other Dutch funds have done. “But we are interested and keeping ourselves informed about these areas.”
Mercer acts as both the actuaries and investment consultants to the fund, a relationship that goes back to 1972.
At pension date, the pension is provided from the fund calculated by the actuaries using mortality tables based on the amount in the member’s account. Similarly on death before retirement of a member, there is a partner’s pension, amounting to a flat amount of E23,000 per annum, but more will be added depending on the amount in the member’s pension account at the time.
While ING provide the custody and administration for the assets it looks after, those with the external managers are handled by KAS Bank in Amsterdam.
Even though last year was not “so good” from a performance point of view, the fund was able to provide members with a 3% growth on their accounts, down significantly from the 5 to 7% that they have been regularly adding to accounts. “Our fixed income returned 5.7% last year.” Once this is added to the account, it is guaranteed up to retirement.
But under drastic changes to the law being proposed, the future of professional funds is uncertain. This proposal came very much as a shock and seems to have derived from official concerns that mandatory participation is outdated and no longer justified and that there should be stronger elements of solidarity, such as having a uniform contributory rate, instead of an individually chosen one.
The Ministry for Social Affairs and Employment claims to have found resistance to mandatory participation among some professional funds, which the pharmacists dispute. This opposition “actually only seems limited to a few instances,” SPA’s 2001 annual report comments rather drily. On the move to one contribution rate irrespective of age and to have uniform pension payment levels, SPA says: “We no longer can take into consideration the difference in life expectancy between men and women.”
All the main professional schemes are part of the Dutch association of professional pension funds that was set up a year ago and includes around a dozen different funds, which is fighting the proposals. Van Zijl is hopeful for a positive outcome from the association’s negotiations. “While we do not agree on the issue of level contributions, we do accept other points such as not taking the pension benefits before a certain age and only as a pension, or not having a medical examination before becoming a member. So we have a lot of solidarity in our fund.”

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