LONDON, UK: Legal & General Group plc has agreed to a £4.8 billion full buy-in with the Boots Pension Scheme, securing the benefits of all 53,000 retirees and deferred members of the Scheme.

This is the UK’s largest single transaction of its kind by premium size and, for Legal & General, the largest single transaction by number of members.

The Scheme is sponsored by Boots, the UK’s leading health and beauty business with over 2,000 stores and 52,000 employees. Boots was founded 174 years ago and is part of Walgreens Boots Alliance, the global leader in pharmacy-led health and beauty retail.

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

This transaction represents another innovative step forward in defined benefit (DB) pension 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 (or the associated sale proceeds) 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.

This bulk annuity is Legal & General’s largest ever single pension risk transfer (PRT) transaction. The Group has now written £13.4 billion of global PRT year to date, including £10.2 billion of net premiums in the UK and $1.5 billion in the US. This creates new business CSM of c£910m, adding to the Group’s total CSM balance which was £12.4 billion at HY23 and had grown at 7% over the year.

Legal & General operates a capital light business and has deployed £270 million of capital to write £12.1 billion of UK PRT. The Group expects to achieve self-sustainability on the UK annuity portfolio again in 2023.

As at 17 November, and net of this transaction, Legal & General’s solvency ratio was estimated to be 224%. This strong solvency position provides the Group with significant firepower to continue to invest in attractive growth opportunities. The Board continues to weigh investment carefully against the relative attractiveness of returning additional capital to shareholders.

The Board has announced its intention to grow the dividend at 5% per annum to FY24 and expects Net Surplus Generation (Operational Surplus Generation plus New Business Strain) to exceed dividends in 2023.

Andrew Kail, CEO, 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. This is testament to our long-standing relationship with the client, and I am proud that we have been able to work seamlessly across our insurance, reinsurance and investment management capabilities to deliver an excellent outcome.

We are continuing to see 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 written to date.”

Alan Baker on behalf of Law Debenture, as Chair of Trustee, Boots Pension Scheme said, “This agreement with Legal & General gives added protection to our members’ long-term benefits by removing market uncertainty and other financial exposures. We welcome the additional payment from Boots, in addition to the sum it has already committed.  As a result, the Scheme will not be reliant on Boots to pay benefits to members and pensions will be protected for decades to come.

“I would like to take this opportunity to thank my fellow Trustee directors and our predecessors, the Scheme officers and advisers for their hard work over many years to reach this positive outcome for our members.”

Sebastian James, Senior Vice President and Managing Director, 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.  This will provide greater certainty to both the scheme members and to Boots, and is an excellent outcome for both parties.”

Boots is the UK’s leading health and beauty retailer with over 52,000 team members and 2,100 stores, ranging from local community pharmacies to large destination health and beauty stores.

Boots serves its customers and patients’ wellbeing for life. It is the leading provider of healthcare on the high street and the UK’s number one beauty destination.

Boots has an unrivalled depth and breadth of product offering, which incorporates its extensive own brand range and innovative portfolio of brands, including No7, the UK’s No1 skincare brand, Soap & Glory, Liz Earle Beauty and Sleek MakeUP. For over 170 years, Boots has listened, learned and innovated, and it continues to challenge itself to improve its products and services every day.

Boots is part of Walgreens Boots Alliance, which is a global leader in pharmacy-led, health and wellbeing retail.