Since the first bread fund was launched in 2006, the idea has caught on in the Netherlands but can trust-based income protection take off in the UK?
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After Jackie Smeets suffered a stroke in September 2012, she was left with speech difficulties that meant she was unable to continue working as a freelance journalist and events producer. For many freelancers with no income protection insurance it could have meant financial disaster. However, within weeks, money began to trickle into her bank account from more than twenty individual donors, giving her the €1,000 a month she needed to survive.
Just three days before illness struck, Smeets had become a founder member of a broodfond (bread fund) – the Dutch name for a group of self-employed people who make monthly payments into a fund to provide a basic income for anyone in the group who becomes too ill to work. “I was a bit ashamed to apply so soon,” she says, “but I was astonished at the support I got from everyone. Because of the fund, I could take the time I needed to fully recover.”
Since the first bread fund was launched in 2006, the idea has caught on in the Netherlands and there are currently 113 funds operating in the country, with more than 4,000 members in total.
There are now moves to bring the model to the UK. In June, the Esmée Fairbairn Foundation provided a £30,000 grant to Radical Routes, a network of co-operatives, to enable it to commission market research and look at the feasibility of replicating the funds here.
So how does a bread fund work? Most groups are built from local networks, but a few are industry-based. They have a minimum of twenty members to ensure adequate funds and a maximum of fifty. “Because they’re based on trust, you have to get to know other participants.” says Biba Schoenmaker, a founder of the first bread fund and partner inBroodFondsMakers (Bread Fund Makers). The Netherlands co-op was set up in 2010 to help establish and support new groups. “When you have more people, it will be more anonymous and maybe people will misuse the fund by asking for a gift when they’re not ill. When everybody knows each other, people won’t do that kind of thing,” she says.
The funds are managed by boards comprised of small groups of elected members, and are changed after a set period. The board organises regular meetings where members can get to know each other and new participants can join on the recommendation of an existing member.
Payouts are based on need and members can choose from eight levels of contribution. For example, for a monthly gift of €1,000, the contribution is €45 a month; for €2,000, it is €90. Unlike insurance companies, there is no risk assessment or medical questionnaire.
The money does not go into a central pot. Each member has their own separate bread fund account, which is managed by the board, so a sick member will receive a small monthly gift from each of the other members. If someone leaves the fund, they can withdraw their share, although exits are only allowed at two points during the year.
The main challenge comes when several members fall sick in the early days before the fund has built up a buffer. In this case, participants receive less then the full gift for a period of time. This has only happened once so far though, says Schoenmaker, and only 1% of bread fund members has asked for a gift. Nevertheless, contingency plans are in development. “We’re now looking at ways that funds can form alliances so that if one has a problem, the other can help,” she adds.
In the UK, community development finance expert Stuart Field is currently working on a feasibility study on behalf of BroodFondsMakers, who are supporting the development of similar schemes internationally. After the study, work will start on drawing up the legal documents and it’s hoped that two pilot programmes will begin in 2015.
However, the legal situation in the UK is different and it seems that money will need to be gifted to the bread fund with the member having no right to get it back on leaving.
“It should be possible but it would need to be done purely on a gift basis. The amount you would need to pay in per month is likely to be higher than an insurance premium. The question is: are people prepared to put more money into something that’s based on trust rather than into an insurance company which charges less but might not pay out when they need it?”
For Smeets though, it’s about more than the money. “It feels good to have that independence from banks and insurance companies. For me, it’s a new dynamic in society. It’s small scale, it’s personal and it’s about taking care of each other.”
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