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Rolls-Royce may inject cash despite pensions surplus

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  • Rolls-Royce may inject cash despite pensions surplus

UK - Rolls-Royce, the engine manufacturer, said it may need to contribute even more to its defined benefits (DB) pensions arrangements over the coming year, even though the UK pension fund was technically in surplus under IAS19 accounting.

Details of the group's 2008 preliminary results, published today, stated the pension fund has a £1.4bn (€1.55bn) technical surplus under IAS19 post-retirement benefit accounting rules, though officials acknowledged the high value of this surplus may not necessarily reflect the pension fund's ability to meet its liabilities today as the accounted assets and liabilities are being affected "primarily by unusually high AA corporate bond rates applied to value the schemes' future liabilities".

The firm said £408m of the UK DB surplus has been recognised on the company balance sheet but with an international pension and healthcare deficit of £550m its actual total post-retirement benefits deficit is still £142m, compared with £123m last year, or £93m with deferred taxation.

Although Rolls-Royce did contribute an additional £500m to its benefits in December 2007 to try and alleviate the pensions deficit pressure, officials today warned in its results: "The group's cash flow in 2009 is expected to be affected by higher pension contributions, reduced deposits and progress payments and increased payments to shareholders."

The firm had already contributed a total of £279m last year, according to its results, most of which - £248m - went to the UK DB plan.

The Rolls-Royce UK pension plans were listed as being valued at approximately €7.835bn under last year's IPE Top 1000 pension funds, though a shift in the exchange rate may have since lowered the sterling-denominated fund's value in euros.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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