Rolls-Royce UK Pension Fund has completed a £4.3bn (€5.3bn) full scheme buy-in with the Pension Insurance Corporation (PIC).
The transaction covers the fund’s total remaining liabilities, comprising the pensions of 15,000 pensioners and 21,000 deferred members, it was announced.
Rolls-Royce said that a key focus for the trustee as part of the transaction was partnering with an insurance company with the same commitment to very high levels of customer care and support, which has been at the heart of the trustee’s strategy in running the fund.
LCP acted as lead transaction adviser to the trustees, with the fund receiving legal advice from Linklaters. Mercer, meanwhile, acted as the pension fund’s actuary and investment adviser.
PIC received legal advice from Addleshaw Goddard as main adviser, with support from Herbert Smith Freehills Kramer on aspects of the transaction.
Rolls-Royce entered into a £3bn longevity swap with Deutsche Bank in 2011 and has later sealed a record deal of £4.6bn by insuring the benefits of around 40% of its members with Legal and General.
At the time, it was the UK’s largest pension buy-out, and was responsible for a big chunk of £17.6bn that was written in the first half of 2019.
Since then, large transactions have become the norm, with a record number of 14 buy-in/out deals over £1bn announced in 2024.
Just last week, the Sedgwick Section of the MMC UK Pension Fund completed a £1.9bn bulk purchase annuity (BPA) transaction with Standard Life, covering the benefits of all 6,500 members of the section, who were previously employed by Sedgwick Group, acquired by Marsh McLennan in 1998.
And these transactions are not exclusive to the UK. In the Netherlands, NN Life & Pensions completed a €4bn longevity risk transfer deal with Prudential Financial last week, while the Dutch pension fund of US company Dow Chemical is aiming to conclude a buyout deal and is currently investigating the first quotes it has received from insurers.
At the Rolls-Royce UK Pension Fund, Liz Airey, chair of trustees, said it was “critical” to find an insurer that can continue to provide members with “exceptional customer service”.
Helen McCabe, chief financial officer at Rolls-Royce, added that this is a “win-win” for all 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,” she noted.
Mitul Magudia, chief origination officer at PIC, said the transaction hinged on who the trustee felt would be best able to continue to provide the same levels of customer care and consideration.
He added that following the announcement of PIC’s acquisition by Athora last month, the group expects to have a strong appetite to complete many more “ground-breaking” transactions in the future.
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