UK – Retailer Boots, which made a high-profile switch into an all-bond portfolio in 2001, says its strategy of using swaps to match pension liabilities is now almost complete.

“The pension scheme’s investment strategy is to match the cash flow and inflation characteristics of the pension liabilities with assets to reduce the impact of market movements,” the company said. It runs a £3bn (€4.5bn) defined benefit scheme.

“The pension scheme intends to allocate 15% of its assets to equities and property to match longer-term liabilities. The remaining 85% of assets will be invested in a diverse portfolio of high quality investment grade bonds of varying maturity, with interest rate and inflation-linked swaps used to improve the matching characteristics with liabilities.

“At March 31 2005, the implementation of this investment strategy was almost complete,” Boots said in its new annual report.

It said the overall asset allocation provides a “relatively good” hedge against liabilities on an actuarial basis, and on an accounting basis under the FRS17 accounting standard.

And it disclosed that the triennial valuation as at April 2004 has now been completed - and that the trustees have agreed a new contribution schedule.

It said there was an £83m funding deficit – compared to £58m a year before - which Boots has agreed to make good with additional contributions (over and above the normal accrual rate) of £11.7m over 10 years.