In what is seen as the U.K.’s largest-ever transfer of corporate pension risk, Rolls-Royce announced today (Thursday) that it is to shift £4.8 billion of assets to the insurer Legal & General. This is becoming a more frequent occurrence as companies look to remove pension scheme risks from their balance sheets with consultants predicting the U.K. will see roughly €30 billion in pension transfer deals in 2019 alone.
Where Rolls-Royce is concerned, the transaction equates to the assets and liabilities of approximately 33,000 out of 76,000 pensioners in its U.K. pension fund. It is estimated the engine maker for the Boeing 787 Dreamliner and the Airbus A350 XWB will be able to reduce its post-retirement obligations by £4.1 billion, thus reducing liabilities and risk. Rolls-Royce has agreed to pay Legal & General roughly £30 million in cash. “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.
The move by Rolls-Royce is yet another part of the company’s simplification, as instigated by its CEO, Warren East, four years ago, where it is aiming to simplify production processes and tackle finances to bolster the company for the future. According to Reuters, shares in Rolls-Royce, which have risen 9% in the last 12 months, were trading up 1% at £8.91 at 0730 GMT.
