UK - Alliance Boots has confirmed it is entering into a consultation period with employees regarding plans to close its £3.9bn (€4.5bn) defined benefit (DB) scheme to future accrual and replace it with a defined contribution (DC) scheme.

Figures from the health and beauty group’s financial statements to March 2009 showed the fund had an accounting surplus of £188m in its two DB schemes - the Boots Pension Scheme, which had an asset allocation of 15% equities and 85% bonds - and the Alliance UniChem UK Group Pension Scheme, which was invested 50% in return seeking assets and the remainder in assets compatible with an LDI strategy. (See earlier IPE article: Alliance Boots pension surplus slips to £188m)

Despite the conservative investment strategy, however, Alliance Boots said proposals to close the DB scheme would “provide competitive pension benefits for all employees of its UK businesses on a more sustainable basis”. 

Figures from the financial statements showed the Group expected to contribute £111m - including £20m of deficit funding - to the DB schemes in the year ending 31 March 2010, in contrast to contributions to Alliance Boots’ various existing DC schemes which totalled £17m in the 12 months to March 2009.
 
Alliance Boots confirmed the proposed closure would not affect previously accrued benefits, or the pension entitlements for workers that have left the company. Instead, it added the introduction of a DC arrangement would be an opportunity to encourage more employees to join the scheme.


Stefano Pessina, executive chairman at Alliance Boots, said: “Having very carefully considered all options, the proposed pensions changes for UK employees is the right step to take. This will help protect the business from the effect of pension funding volatility and ensure the long-term sustainability of the Group’s UK retirement savings schemes.”

“We have seen many large businesses, like ours, make this move and our aim is to encourage greater participation from all UK employees in a competitive and fairer retirement savings scheme.”

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

Topics