UK - Retail giant Boots - which stunned the pensions industry by its 100% move to bonds - is considering a switch back to equities, it can be revealed.
The move is being considered in wake of the departure of head of corporate finance John Ralfe who masterminded the shift to bonds 16 months ago.
A senior fund manager believes a move back to equities would be both “shrewd and timely”.
He said: “Given that markets are unlikely to fall in the medium-term, a move back into equities could result in the firm having to pay much less in contributions in the future.”
A move back into equities would also benefit the scheme’s funding position in FRS17 terms, as the projection for dividend growth for equities is set higher than that for bonds.
And an investment consultant – who chose not to be named – confirmed that a switch back to equities would lower the pensions charge in the firm’s accounts.
He explained that as the assumption rates for bonds were much lower than those for equities, any increase in equity allocations would lower the company pension costs in its profit and loss account.
A Boots spokeswoman refused to confirm or deny any shift and pointed out it “would be sensitive if we were to announce to everybody that was what we intended to do”.
Any move from bonds to equities would be spearheaded by the firm’s new finance director Howard Dodd.
Boots sold its £1.7bn equities portfolio in September 2001 when the FTSE100 was at an average of 6000.
The £2.5bn Boots Pension Scheme has increased slightly in value since making the shift and now stands £1bn higher than if it had not made the move.
Aon Consulting principal Chris Erwin commented: “Pension schemes should regulate their assets/liability balance according to their liabilities and not according to their guess on what the markets will do.”
The directors of collapsed construction giant Carillion were "contemptuous" of funding their defined benefit (DB) pension schemes, and "refused to give an inch", Frank Field has alleged.
The PPF 7800 deficit was slashed in half last month as gilt yields rose. Victoria Ticha asks if this is the start of a longer trend
Frank Field is to warn Sir Philip Green not to sell his Arcadia business without ensuring defined benefit (DB) pensions are adequately protected, PP can confirm.
Some 79% of people would like to see stricter rules and checks to ensure pension pots are secure, according to a survey by the Pensions and Lifetime Savings Association (PLSA).