Rolls-Royce strikes UK’s biggest pension deal with insurer L&G

Rolls-Royce agreed Britain’s largest ever transfer of corporate pension risk, announcing on yesterday it would shift £4.6bn of assets to insurer Legal & General.

A RB211 turbine at the Rolls-Royce Advanced Blade Casting Facility. Picture: Andrew Roe
A RB211 turbine at the Rolls-Royce Advanced Blade Casting Facility. Picture: Andrew Roe

Companies are increasingly transferring pension obligations to insurance companies to remove the risk of such schemes from their balance sheets. Consultants predict £30bn worth of UK pension transfer deals this year.

Rolls-Royce, which employs several hundred people at the Advanced Manufacturing Park in Rotherham where it produces single-crystal turbine blades, will transfer the assets and liabilities of around 33,000 pensioners in its UK Pension Fund, it said in a statement, out of a total 76,000 members.

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The deal will reduce the company’s post-retirement obligations by around £4.1bn, leaving the remaining liabilities smaller and carrying less risk. “This agreement will result in increased security for Rolls-Royce pensioners and reduced risk for our business,” said Joel Griffin, Rolls-Royce head of pensions.

As part of the deal, Rolls-Royce said it would pay L&G around £30m in cash.

The transaction is another step in the simplification of Rolls-Royce initiated by chief executive Warren East nearly four years ago. He has stripped out layers of management, simplified production processes and tackled finances to make the company fit for the future.

The company’s shares, which have risen nine per cent in the last year, were trading up one per cent yesterday morning.

L&G, which has flagged pension risk deals - or bulk annuities - as one of its areas of focus, said it had agreed £6.2bn of deals so far in 2019.