Rolls-Royce and the trustees of its pension fund have agreed a longevity swap to provide additional security to members of its final salary scheme.
The deal with Deutsche Bank reduces the risk on approximately £3 billion of the fund’s liabilities and covers around 37,000 Rolls-Royce pensioners.
Under the longevity swap, if pensioners live longer than expected the bank will make payments to the fund to offset the additional cost of paying pensions.
If the reverse applies, the fund will be required to make payments to the bank.
The cost of the transaction will be borne by the pension fund and will have no material affect on the funding arrangements.
Andrew Shilston, finance director at Rolls-Royce, said: “We have made sure that as our pensioners live longer in retirement we have made proper provision for them.
“This is the latest in a series of measures we have taken to achieve greater certainty for our future funding requirements”.
Paul Spencer, chairman of the Rolls-Royce pension fund trustees, said: “We have been working closely with Rolls-Royce for some years to enhance the security of all our members’ benefits. This is another important step forward.”
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