Has the Boots-L&G pension deal scuppered my plan to retire at 60? https://t.co/xYZZAOboIl

— Stephanie Hawthorne (@HawthorneSJJ) December 18, 2023

Steve Webb must have grimaced when Money Mail asked him to answer this question

I am hoping that you can give some advice for myself and other members of the Boots defined benefit pension scheme.

The recent announcement that the Boots pension fund has been bought out by Legal & General was followed up with standard letters to all members outlining the buyout.

Also stated in the letter was a change to the early retirement rules. Previously there was no penalty for taking your pension from 60-65, and a 4 per cent reduction for each year taken before the age of 60 down to 55.

I like many others (I’m in my 50s) was actively planning to take my pension early and have made financial arrangements based on figures provided by the scheme. 

This has now changed with no notice, and as far as I am aware no grace period.

I have tried contacting the pension department by email and I am currently waiting for a response. Can you give any advice that may be useful to myself and other members?

Steve has some form with the Boots scheme, having held them up as permitting members to be bribed out of pension rights with “sexycash” in 2011

Now he’s being asked to comment on the disappearance of a long-held perk of the pension scheme , that the Trustees of the Boots scheme have abandoned so that L&G can offer an acceptable price to take the scheme’s liabilities off their hands.

There was considerable corporate pressure on the Trustees. The FT commented

By offloading the pension liabilities, Boots has removed one obstacle to Walgreens selling the business. Last year, the US company abandoned an attempt to sell the chain, pointing to an “unexpected and dramatic change” in market conditions.

The conflicts on the Trustees are immense and it’s difficult for Steve Webb to find the right balance in his article.

The old campaigner of the “sexy-cash” days must have been fuming that the buy-out did not include discretionary benefits that members had relied upon and had been quoted on.

The commercial Steve Webb had to point out that members have no right to such benefits and that neither L&G or Boots had done anything wrong.

So the response to the question reads like it has been written by a lawyer. Steve Webb’s aversion to lawyers is well known, I imagine he is still grimacing when he reads his words.

 it seems that the trustees have decided not to ‘lock in’ what seems to have been the discretionary ability to pay pensions in full from the age of 60 rather than 65.

For those affected this is obviously a very significant change if they would otherwise have received a full pension at 60.

Unfortunately, the fact that some pension statements will have been sent out based on a pension age of 60 rather than 65 is unlikely in itself to generate a legal entitlement, as these are likely to stress that they are only ‘estimates’.

It is the pension scheme rules which determine what people are entitled to.

From the perspective of the trustees, they will have weighed up the overall proposal from the company and taken professional advice before deciding whether proceeding with the deal was the right thing to do.

“The buy-in transaction would not have been affordable if all discretionary benefits had been included”

Steve Webb went so far as to contact the Trustees and ask their views. In a little legal dance, the Trustees (or their lawyers) responded

1. Was the ability to take a full pension at 60 rather than 65 open to all members of the scheme, or was it subject to any threshold test (eg a minimum number of years’ service)?

Answer: The option, from age 55, to apply to the trustee to grant an early retirement pension, which was not reduced for early payment between age 60 and 65, applied to most but not all members of the scheme.

2. Some members have had statements for many years based on a full pension at 60. 

Did the trustees consider any sort of transitional arrangements for those who might be close to 60 and have made financial plans on the basis of those statements?

Answer: As you would expect, the trustee has taken significant legal advice around this important decision and the transaction as a whole.

The discretionary nature of the early retirement enhancement is clearly set out in the rules of the scheme. Retirement quotations reflected the need to apply to the trustee.

There are transitional arrangements in place for members where an early retirement quotation was recently issued.

3. Given that the trustees chose to carry over some discretionary benefits (such as pensions for dependents) to L&G, why was the discretionary ability to take a pension at 60 not carried over?

Answer: There was no legal requirement to do so. The buy-in transaction would not have been affordable if all discretionary benefits had been included.

The grim reality for deferred members of the Boots Pension Scheme is that their plans to retire at 60 look to have been scuppered by the buy-in. Their hope is that they can find some mitigation in “transitional arrangements” but this looks like it is honouring only early retirement requests in the pipeline.

That looks like being of little comfort to the Boots pension scheme member asking the question.

And it looks like the Pharmacists Union , headed by union stalwart Paul Moloney, have swung into action (perhaps reading Jnamdoc’s comment on this blog

Who is protecting the members’ interest?

While not a fan of the American class- action culture, the lack of a collective voice for members in the UK is lamentable.

Trustees who should represent members, and should more properly have used the overfunding in the scheme to protect customary discretionary benefits, will instead hide behind the TPR mantra of untempered at any cost de-risking and ‘flight path’ aspirations to insurer as a poor excuse for not representing members’ interest.

That the expected insurer profit on the transaction will be circa £1bn, money that should have been invested by Trustees to help provide discretionary benefits, will be brushed under the carpet, lost in opaque accounting disclosures.

Trustees should be legally obliged to request (and to disclose) the expected insurer profit over the life of the contract and in absolute terms, not further obfuscated by npv disclosures. Insurers too, with upside and downside range. Perhaps this is an area that Mr Webb with his parliamentary contacts could drive some meaningful change?

The point of having discretionary powers should be to recognise that in some circumstances, such as in the midst of an inflation and low growth cost of living crisis, Trustees should use discretions to spend surplus on protecting members’ living standards.

Once again it is the ‘industry’’, that should be there to protect and serve members’ interests, that wins. Everyone wins, members lose. It’s a national disgrace.

TPR – OF INSURERS, FOR INSURERS.

A proper mandate for the TPR would be to actually support rather than castigate Trustees, regulating instead the myriad of advisers and insurers, limiting the graft extracted against members’ interests?

For we read in Professional Pensions

PDA Union national officer Paul Moloney explained: “We have considered, with our advisors, the claim by the trustees of the scheme that the option to take an unreduced pension from 60 was discretionary and not a right and believe there is insufficient evidence to fully support this claim. We are therefore questioning whether this option should have been secured as part of the buy-in and not ended with immediate effect.

But heh – Wallgreens are a step closer to selling Boots!