Aerospace manufacturer Rolls-Royce Holdings PLC has completed a 4.3-billion-pound ($5.77 billion) bulk annuity buy-in with Pension Insurance Corp., transferring the remainder of the Rolls-Royce U.K. Pension Fund’s remaining liabilities to the insurer.
The transaction will cover the pensions of 36,000 beneficiaries: 15,000 pensioners and 21,000 deferred members.
According to a statement from Rolls-Royce, a full transfer of liabilities is anticipated over the next 12 months. The transaction has been secured in anticipation of a full buyout, in which the liabilities and management of the pension’s benefits would be transferred to PIC at a later date.
“This is a win-win for all our stakeholders,” said Helen McCabe, Rolls-Royce’s chief financial officer, in a statement. “We are proud to have been able to fully fund and secure the pension promises made to colleagues, former colleagues and their families. This deal is also another step on our journey towards simplifying Rolls-Royce.”
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The Rolls-Royce UK Pension Fund is a scheme for employees who joined the company before March 31, 2007. The company’s defined contribution plan, the Retirement Savings Trust, will be unaffected by the transaction.
As of June 30, 2024, the scheme had a funding ratio of 118%, according to financial documents. The pension fund had 5.029 billion pounds in assets and 4.261 billion pounds in liabilities.
The PRT transaction follows Rolls-Royce’s 4.6-billion-pound buy-in with Legal & General in 2019, which at the time was the largest bulk annuity transaction in U.K. history.
In 2016, L&G also completed a 1.1-billion-pound buyout for the Vickers Group scheme, a pension fund that was merged into the Rolls-Royce UK Pension Fund.
As corporate pension plans globally have entered funding surplus, these plans are increasingly turning to PRT transactions to offload their liabilities. According to U.K.-based consultant Lane Clark & Peacock LLP, 2025 could see between 40 billion and 50 billion pounds in transaction volume for the third year in a row, while crossing the 300-transaction threshold for the first time.
According to the Pension Protection Fund’s PPF 7800 Index, which tracks the finances of nearly 5,000 corporate defined benefit plans in the U.K., the aggregate funding ratios of these plans was 126.6% at the end of June.
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Tags: Pension Insurance Corp., Pension Risk Transfer, Rolls Royce
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