The Rolls-Royce UK Pension Fund has insured all £4.3bn of its liabilities in a buy-in, covering the pensions of 15,000 pensioners and 21,000 deferred members, in one of the largest deals to date.
 
The trustees of the company specialising in power and propulsion solutions for airlines, industry and defence chose Pension Insurance Corporation for the deal. PIC is in the process of being bought by insurance and reinsurance company Athora.
   

   

“We have invested significant time and effort over a number of years to provide our members with exceptional customer service. It was critical for us that we selected an insurer to secure our members’ pensions which is able to continue this. We are really delighted that PIC, which has a long track record of excellence in customer service, brought us such a strong proposition. We feel our members are in safe hands,” said Rolls-Royce's independent chair of trustees, Liz Airey.

The chief financial officer of the sponsoring company, Helen McCabe, said: “This is a win-win for all our stakeholders. 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.”

PIC highlighted its customer satisfaction rate of 99.3%. Mitul Magudia, PIC’s chief origination officer, said: “Ultimately the transaction hinged on who they felt would be best able to continue to provide the same levels of customer care and consideration. We were delighted to be selected and proud that the trustees have entrusted us with helping to continue to deliver this service to the members.”

Magudia said that following the announcement of PIC’s acquisition by Athora, which is subject to regulatory approval, “we expect to have strong appetite to complete many more ground-breaking transactions like this in the future”.

The scheme’s funding level rose to 115% at its March 2023 valuation, from 105% three years earlier. At the 2024 update, this had increased further to 118%, meaning the £5.2bn scheme had a nearly £800m surplus.

LCP acted as lead transaction adviser to the trustees, while Linklaters gave legal advice, with Mercer as scheme actuary and investment adviser. PIC received legal advice from Addleshaw Goddard, supported by Herbert Smith Freehills Kramer on aspects of the transaction.

Rolls-Royce is known as a luxury car brand, but the car and aerospace businesses were split when the company, which owned Bentley, was temporarily nationalised in 1971. Today, Rolls-Royce Motor Cars is owned by German carmaker BMW.

The defined benefit scheme for Bentley still carries the Rolls-Royce name, however. Last year, £880m of liabilities in the Rolls-Royce & Bentley Pension Fund were secured with Standard Life.