Rolls-Royce completes pensioner buy-in transaction to insure £4.1bn pension liabilities


Engineering organisation Rolls-Royce has completed a pensioner buy-in transaction with Legal and General Assurance Society, totalling £4.1 billion.

The policy insures the pension liabilities, worth around £4.1 billion, for 33,000 pensioner members of the Rolls-Royce UK Pension Fund, which has a total of 76,000 members. In addition, approximately £4.6 billion of pension assets will be transferred to Legal and General, and Rolls-Royce will also make a £30 million exceptional cash contribution to the scheme.

The transaction has been designed to fully insure the payable benefits from the pension fund to provide permanent security for pensioner members, while reducing the organisation’s post-retirement obligations; the residual obligations will therefore be smaller and lower risk for the pension scheme trustees and Rolls-Royce to manage in the future.

Funding levels for the scheme will remain unchanged, but there will be a reduction in net assets of around £0.5 billion. Free cash flow guidance for the full year will also stay the same.

Joel Griffin, head of global pensions and benefits at Rolls-Royce, said: “This agreement will result in increased security for Rolls-Royce pensioners and reduced risk for our business. Legal and General is one of the world’s leading insurance [organisations] 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, chief financial officer at Rolls-Royce, added: “This is a significant transaction which represents another step on our journey to simplify, de-risk and strengthen the [organisation]. 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.”