Ralfe to leave UK retailer Boots

Ralfe last year pioneered Boots' pension fund shift from equities and short-dated bonds to long-dated bonds, sparking fierce discussion in the pension fund industry about the merits of such a move.

The Boots final salary scheme is one of the UK’s largest pension funds, with 72,000 members and £2.3 billion of assets. From April 2000 to July 2001, the fund sold all its equities and short-term bonds and moved 100% into long-dated sterling bonds. “They are all AAA/aaa sovereign issuers and a very close match for the maturity and indexations of pension liabilities," Ralfe wrote in Risk in November 2001. "This move from equities to matching bonds turns conventional pension fund wisdom on its head,” he added.

The idea was to reduce Boots’ financial risk by more closely matching pension assets with pension liabilities. “Pension fund risk has been opaque because of poor accounting and disclosure requirements,” Ralfe added. “It will become more apparent over the next three years as FRS17 is adopted by all UK companies, and shareholders, creditors and pension scheme members will expect it to be properly managed.”

But Boots, now with a new finance director, Howard Dodds, said in October that it had decided to delay the introduction of FRS17, citing an exension by the UK's Accounting Standards Board of the transitional regime of FRS17. "The company has reconsidered its decision to adopt FRS17 in the financial statements for the current year and has decided to continue to account for pensions under SSAP24 until the definitive new standard emerges," Boots said in its first-half statement issued on November 7. Under SSAP24, Boots' first-half pension cost was £32 million.

Ralfe acted as an adviser to the Accounting Standards Board when it was developing FRS17. He strongly believed companies should move as swiftly as possible to the new scheme that requires mark-to-market pension disclosures. Boots' about-turn has been widely reported as a contributing factor behind Ralfe’s resignation.

Boots and Ralfe were not immediately available for comment on the matter. It is unclear if the company is planning to bring equities back into its pension fund portfolio, as cited in some press reports.

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