Rolls-Royce offloads record £4.6bn pension scheme
Derby-headquartered Rolls-Royce has offloaded some £4.6bn of its pension liabilities to Legal & General.
The deal covers the transfer of assets and liabilities relating to around 33,000 pensioners who are members of the Rolls-Royce UK Pension Fund out of a total of 76,000 members.
In a statement to the London Stock Exchange, Rolls-Royce said: “The transaction will fully insure benefits payable from the fund and provide permanent security for pensioners, while reducing the Group’s post-retirement obligations by around £4.1 billion. The residual obligations, which remain well funded, will be smaller with less risk for the Trustee and Rolls-Royce to manage in the future.”
Joel Griffin, head of global pensions & benefits, Rolls-Royce, said: “This agreement will result in increased security for Rolls-Royce pensioners and reduced risk for our business. Legal & General is one of the world’s leading insurance companies and as a result of this deal the provision of benefits will be governed by stringent funding requirements, resulting in a secure pension environment for our pensioners.”
Stephen Daintith, CFO, Rolls-Royce said: “This is a significant transaction which represents another step on our journey to simplify, de-risk and strengthen the company. Rolls-Royce and the Trustees of the Rolls-Royce UK Pension Fund have worked intensely to ensure that the fund continues to have the resources it requires to meet its obligations. This agreement is a further step towards ensuring benefits for our pensioners.”
Alongside the transfer of around £4.1bn of liabilities to Legal & General, the Rolls-Royce trustee will also transfer around £4.6bn of assets. This results in a reduction in net assets of around £0.5bn though funding levels remain unchanged.
Last year, Rolls-Royce and unions reached an agreement on changes to the company’s pension schemes which saw the company keep its final salary scheme open for current active members until at least January 2024.
The company also agreed to, from 2021, increase its contributions to the savings of the 10,000 employees enrolled in defined contribution schemes. Under changes to the scheme pension savings for younger people will also increase.
