Boots Pension Scheme completed a £4.8bn buy-in with Legal & General securing benefits of all 53,000 retirees and deferred members, making it the UK’s largest single transaction of its kind by premium size and, for Legal & General, the largest single transaction by number of members.

Boots will bring forward approximately £170m of already committed payments to the scheme and has committed to pay extra contributions expected to be approximately £500m to the scheme.

In a process expected to take up to two years, members of the scheme will be provided with individual annuity policies issued by Legal & General, who will then be responsible for paying members’ benefits directly, enabling the scheme to be wound-up.

Legal & General has a long-standing relationship with Boots, having provided investment management services to the scheme for over 20 years. The buy-in begins the conclusion of a de-risking process that the scheme first embarked on in 2001.

According to Legal & General, the transaction represents another “innovative step forward” in defined benefit (DB) de-risking by providing a combined investment and insurance solution for the scheme’s asset holdings, allowing the scheme to achieve the certainty of a transaction whilst also maximising value by transferring its assets to Legal & General.

Legal & General worked in close partnership with the sponsor and trustee to manage this transaction which incorporated both asset transition and deferred premiums features.

Cardano was the strategic advisor to Walgreens Boots Alliance and lead broker for the transaction, while Baker McKenzie provided legal advice. Aon was strategic adviser, lead investment adviser and broker for the transaction representing the trustee, while Sackers provided legal advice. Slaughter and May and Simmons & Simmons provided legal advice to Legal & General.

Alan Baker on behalf of Law Debenture, as chair of trustee for Boots Pension Scheme, said  the agreement with Legal & General added protection to scheme members’ long-term benefits by removing market uncertainty and other financial exposures.

Baker added that as a result of additional payment from Boots, in addition to the sum it has already committed, the scheme will not be reliant on Boots to pay benefits to members and pensions will be protected “for decades to come”.

Sebastian James, senior vice president and managing director of Boots, said: “We are very pleased to have achieved the gold standard outcome for our pension scheme and to have fully secured the benefits of all members with a highly respected insurer.”

James added that this will provide greater certainty to both the scheme members and to Boots, as it is an “excellent outcome” for both parties.

Andrew Kail, chief executive officer of Legal & General Retirement Institutional, said: “We are very pleased to have agreed this buy-in today with the Boots Pension Scheme, representing our largest ever single transaction.”

He said the transaction was a testament to its long-standing relationship with Boots, adding that there continues to be an unprecedented acceleration in demand in this sector, driven by more pension schemes being closer to buyout than ever before.

“Against this backdrop, we have posted a record year with £13.4bn of global PRT [pension risk transfer] written to date.”

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