Boots ponders pensions switch

BOOTS is understood to be considering switching part of its £2.5 billion pension scheme back into shares - less than 18 months after it became the first British corporation to put its entire retirement fund into bonds.

Financial Mail has established that trustees of the pension fund have been approached by company executives to find out whether they would consider moving some of the scheme's assets back to the stock market.

There are also suggestions that Boots has talked to fund managers about transferring some money into equities while share prices are low.

The change of strategy, as the hard-pressed High Street chain searches for a chief executive, is being discussed after the departure of several senior executives who pioneered matching pension fund liabilities with bond earnings.

That groundbreaking switch - Boots sold its shares before the stock market slumped - means its fund is now probably worth £1 billion more than if it had stayed with equities.

The company has a mature pension scheme with many more pensioners than current employees, and the move was aimed at capping the company's contribution to the fund at £50 million for at least the next three years. In addition to having netted gains from timely share sales, the move saved Boots about £9.75 million of the £10 million a year it spent on managing the fund for 72,000 members.

Following Boots' move and continuing falls in stock markets, many other company pension funds invested in bonds, exacerbating share price falls. Any decision about allocating pension assets rests with the fund's trustees and only one of them, personnel director Andrew Smith, is a main board executive.

A Boots spokeswoman said there had been no official consultation between the company and pension fund trustees. She said that John Watson, chairman of the trustees, was unavailable for comment. Other insiders denied that Boots was about to make a wholesale switch back into the stock market.

The company said it would not comment on the allocation of pension assets as this could affect stock market prices. But pension consultants said it would not be a surprise if Boots were to re-allocate its assets, given that share prices remain low.