UK - Retail giant Boots has said that its pension charge is expected to rise by £40m to £70m in 2004/05, on the back of falling bond yields and the "roll-off" of the amortisation of earlier surpluses.
In 2002, the £2.4bn scheme had moved its entire investment portfolio to bonds.
Cash contributions that the group makes to the pension scheme are also expected to rise from the current level of £50m each year to levels of around £100m.
A new valuation that is being carried out by the group suggests the surplus identified in its earlier valuation was now likely to be “much reduced”.
“The reduction in surplus expected in the forthcoming valuation, together with lower real yields on long-term bonds, is likely to have the effect of increasing the SSAP24 pension charge by approximately £40m, from £30m in 2003/04 to £70m in 2004/05,” the group said.
It added that in common with other pension funds, increased life expectancy was likely to continue to put upward pressure on the cost of meeting future liabilities.
Under SSAP24, any surplus or deficit identified on valuation is spread over future years and the pension charge to the accounts in recent years has been reduced by the unwinding of surpluses from previous valuations, Boots said.
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