The trustee of the Boots Pension Scheme has agreed a £4.8bn full buy-in with Legal & General (L&G), marking the UK's largest single transaction of its kind by premium size.

The deal secures the benefits of all 53,000 retirees and deferred members of the scheme, meaning that it is also L&G's largest single transaction by number of members.

As part of the deal, Boots agreed to 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.

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 L&G.

The trustee and Boots have written to members to inform them of the changes, confirming that savers in the scheme will be provided with individual annuity policies issued by L&G, who will then be responsible for paying members' benefits directly.

This process is expected to take up to two years to complete, after which the scheme will be able to be wound-up.

The buy-in was highlighted as "another innovative step forward" in DB de-risking, as it provided 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.

It also marks the conclusion of a de-risking process that the scheme first embarked on in 2001, with recent reports suggesting that Walgreens, the American owner of pharmacy chain Boots, was willing to pay £1bn to hand over responsibility of the Boots pension scheme, amid concerns that the guarantee Walgreens had given to the scheme could be stopping private equity firms from purchasing Boots.

Boots Pension Scheme chair of trustee, on behalf of Law Debenture Pension Trust Corporation, Alan Baker, commented: "This agreement with L&G 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."

Adding to this, Boots managing director and senior vice president, Sebastian James, 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."

Chief executive officer at L&G Retirement Institutional, Andrew Kail, added: "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."

Boots has a long-standing relationship with Legal & General, having previously completed a £50m full scheme buy-in with the insurer for the Boots Supplementary Pension Plan last year.

Aon risk settlement partner, John Baines, also highlighted the deal as "further evidence of the innovation that can be achieved at scale and pace in an incredibly busy, yet buoyant, insurance market".

"A key element in achieving this transaction, was dealing with the significant portfolio of illiquid investments held by the scheme.

"Working in close partnership with the sponsor and trustees, we applied our experience, innovative solutions and lessons learned from other deals of similar size, ensured this wasn’t a barrier to securing benefits.

"This, combined with taking action on investments early and having the right investment toolkit, ensured risk was managed effectively, costs were reduced and the transaction completed."

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