UK - The £2.3bn Boots Company Pension Scheme's move from equities to bonds has enabled its parent to embark on a massive share buyback programme.
The high street chemist says the £300m buyback is a direct result of the pension scheme’s move to bonds, which has strengthened the company's balance sheet.
A City source close to the company said : “Having taken risk out of the pension fund by moving from equities to bonds, it has taken risk out off-balance sheet, so they can add risk on balance sheet and maintain a smaller pension fund cushion.”
The source added: ”Previously, Boots had a business investing in equities. They no longer have that business and can return to shareholders the capital that was used to support that business.”
The £300m given back to shareholders represents around 20% of the value of the equities that the Boots pension scheme sold over the 18 months to July 2001.
Industry figures say that Boots was lucky in selling its equities at a time when stock markets were buoyant and that other schemes hoping to follow the move to bonds are having to do this more gradually.
Standard & Poor’s associate director Gordon Wright said: “Boots felt comfortable that they were doing the right thing at the right time and shareholders are being rewarded as a result.
“Not everybody made that move at that time and some people are still making the move in a rather more gradual fashion.”
Barnett Waddingham partner Colin Richardson said: “By moving from equities to bonds, it is likely that Boots have reduced their risks.
“The fact that they have reduced their risk gives them more freedom in other ways.”
By Jonathan Stapleton
The Brunel Pension Partnership has become the fourth local authority pool to receive the green light from the regulator.
Defined benefit (DB) schemes are to be offered a new consolidator as the former chief of the Pension Protection Fund (PPF) launches 'The Pension SuperFund'.
Martin Freeman has been hired as head of technology product and development at Smart Pension, to support the 'growing' technology product side of the business.
Tim Sharp says the government has missed some big opportunities to help workers in the DB white paper.