Kohlberg Kravis Roberts, the US private equity firm, has offered to boost the Alliance Boots pension fund by only £50 million, a small fraction of the £1 billion demanded by the fund’s trustees to protect its position.

The growing dispute between the pension fund trustees and KKR threatens to derail the £11 billion bid for the health and beauty products retailer.

Last week the trustees demanded an immediate cash payment of about £400 million, plus additional future guarantees totalling £1 billion.

However, KKR and Stefano Pessina, the Italian billionaire who is Alliance Boots’s biggest shareholder, are offering only £50 million upfront with annual payments thereafter of £10 million to £20 million, The Times has learnt.

John Watson, chairman of the Boots pension scheme, wrote to its 66,710 members last week to warn them of the “serious implications” that the highly leveraged £11.1 billion takeover bid – which includes more than £8.2 billion of debt – had for the scheme.

The trustees claim that the scheme’s current deficit is about £305 million, largely because of increased life expectancy.

Mr Watson wrote that, in the long term, the scheme would need more than three times that amount to ensure its financial stability in the event of Alliance Boots going bust.

However, other than exerting public pressure, the trustees appear to have little leverage over KKR.

Although the Pensions Regulator, which was set up to ensure that pension funds are treated fairly by their sponsoring companies, can mediate in discussions between potential buyers and fund trustees, experts said that the regulator could not legally force an acquirer to pay more into a company pension scheme than its IAS 19 deficit, which is a much lower figure calculated using accounting, rather than actuarial, methods.

John Ralfe, an independent pensions consultant, said: “We shouldn’t exaggerate the regulator’s legal powers.”

According to a different set of figures under IAS 19 released last week, the Boots scheme actually has a small surplus of £20 million.

The scheme has assets of £3.5 billion, but it would cost more than £4.5 billion to close down the scheme and buy pensions for its members.

KKR and Mr Pessina, who have insisted that “substantial progress” has been made towards resolving the disagreement, laid out full details of the bid in a 145-page scheme-of-arrangement document on Wednesday.

It showed that Richard Baker, the Alliance Boots chief executive, is set to collect a £6.5 million windfall when the buyout is completed.

Scott Wheway, the health and beauty retail director, will receive £1.2 million, while Mr Pessina, who is executive deputy chairman and a 15 per cent shareholder, will land £820,000.

His partner, Ornella Barra, who is also a Boots director, will receive £531,000.

The document sets a date of May 29 for shareholders to vote on the offer. If it is accepted, Alliance Boots would be delisted on June 28.

Debt for the deal has been raised from a syndicate of banks including Barclays, Bank of America and Citigroup.

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