Rolls Royce agrees pensions plug
UK - Rolls Royce plc has agreed a deal with its pensions trustees to close some of the gap of its pension funds deficit with a £500m (€750m) cash injection but close the final salary schemes to new members.
Trustees of the Rolls Royce plc defined benefits schemes - of which there are three - have been in talks with the scheme's employer since February about the status of the schemes representing 120,000 members, as they had a collective funding deficit of just under £1bn to the end of 2006 or £665m before tax.
The deficit had already reduced from £1.6bn in 2005 but these latest developments mean the Rolls-Royce Group pension scheme and the Vickers pension funds now all closed to new members from April 1 2007, alongside the Rolls-Royce pension fund which closed to new members in 1999.
A defined contribution scheme will be open to any future members.
At least £110m of the payment will cover the one-off cost of increasing payments to pensioners who choose to up the amount they receive as a lump sum paid for pension commuted, in line with HM Revenue & Customs practice applied by other schemes.
Similarly, the company has agreed a 2% discretionary increase, costing £30m, for pensions which do not benefit from any guaranteed increase while the remaining £360m towards the deficit will be paid "when final risk reduction strategies are agreed with the Trustees", according to a statement from Rolls Royce plc.
Rolls Royce notes trustees of the Rolls-Royce Group pension scheme have already implemented reforms to its investments to better reflect its liabilities.