Rolls-Royce (RR.) has agreed the largest bulk annuity transaction seen in the UK, transferring £4.6bn of scheme assets to Legal & General (LGEN).
In an arrangement also known as a pension buyout, the insurer will pay the pensions of around 33,000 pensioners of the scheme’s 76,000 members. Legal & General has taken on around a third of the Rolls-Royce UK Pension Fund’s assets. It has also received £4.1bn in scheme liabilities, resulting in a £0.5bn reduction in Rolls-Royce net assets.
According to its latest annual report, as of March the scheme had £12.8bn in assets and a surplus of £1.9bn. As part of the deal, Rolls-Royce has made an exceptional cash contribution of £30m, with the scheme’s assets now worth £8.4bn. The scheme’s funding levels remain unchanged, as does the engineer’s guided free cash flow for the full-year.
Legal & General has now carried out four of the five largest pension risk transfers in the UK. L&G sealed similar deals with British Airways, former British chemical company ICI and automotive supplier TRW. The insurer has history with Rolls-Royce, having provided investment management services for the plan since 1989. In 2016, Rolls-Royce agreed a £1.1bn buyout with L&G for its Vickers Group Pension Scheme.
