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COMPANIES UK: Boots pension fund still
By Stephanie Kirchgaessner
Financial Times, May 06, 2003
The Boots pension fund has ruled out mounting
speculation that it plans to re-start buying equities after its landmark
decision to switch its investments into bonds.
John Watson, chairman of the trustees of the
Boots pension scheme, said a move back into equities was "not
currently on the agenda".
The comments come after months of stock
market speculation that the pension fund might start to reverse its
investment policy following the departure late last year of John Ralfe,
head of corporate finance at chemists' chain and one of the architects of
the switch into bonds.
The departure followed disagreements with
Howard Dodd, new finance director, over issues including pensions. Under
Mr Dodd, Boots backtracked from a commitment to early adoption of the
controversial accounting standard FRS 17 which takes a snapshot of the
assets and liabilities of a pension fund.
The statement by Mr Watson is likely to
prompt a collective sigh of relief among Boots employees as other pension
funds struggle to cope with large deficits because of their exposure to
sagging equity markets.
Analysts estimated UK pension funds had a
deficit under FRS17 of £85bn at the end of January. The figure represents
a stark contrast to Boots' £2.4bn pension fund, which showed a surplus of
£170m in March 2002.
Critics of the Boots strategy say a move back
into the stock market could lead to higher returns in the long-term and
lessen the burden on the company for contributions to employee schemes.
Some analysts have also argued bond prices are due for a correction after
a sustained rally.
But Mr Watson, who rarely comments in public,
does not seem to be deterred. "While John Ralfe helped us greatly
with the move to bonds, the ultimate decision was taken by the trustees.
John Ralfe's departure from Boots will have no impact on our long-term
strategy," he said in a letter to Professional Pensions.
The chairman also emphasized that the final
decision on investment strategies lay with trustees, not Boots'
"Clearly in arriving at our preferred
strategy we take into account many issues, including any views the company
may wish to put to us," Mr Watson said.
he added that "our investment strategy is the responsibility of the
trustees, and the trustees alone".