The Rolls-Royce UK Pension Fund has transferred the pension benefits of around 33,000 pensioners to Legal & General in a deal worth around £4.6bn.

Legal and General

Image: Rolls-Royce signs £4.6bn pension deal with Legal & General. Photo: Courtesy of Legal & General Group Plc.

Touted to be the largest bulk annuity written in the UK, the deal will fully insure benefits payable from the fund and offer permanent security for pensioners, while reducing Rolls-Royce’s post-retirement obligations by around £4.1bn.

Rolls-Royce said that the residual obligations, which remain well funded, will be smaller with less risk for the Trustee and Rolls-Royce to manage in the future.

Rolls-Royce global pensions & benefits head Joel Griffin said: “This agreement will result in increased security for Rolls-Royce pensioners and reduced risk for our business.

“Legal & General is one of the world’s leading insurance companies and as a result of this deal the provision of benefits will be governed by stringent funding requirements, resulting in a secure pension environment for our pensioners.”

Legal & General claims that it has now transacted four of the five largest pension risk transfer (PRT) deals in the UK. Other transactions include: British Airways (£4.4bn), ICI (£3bn) and TRW (£2.5bn).

Legal & General has been associated with Rolls-Royce since 1989, providing investment management services to the pension plan. In 2016, Legal & General issued a £1.1bn buyout for the Vickers Group Pension Scheme.

Following the transaction, the insurance company said that it will continue to provide services for a significant portion of Roll-Royce Pension Fund’s remaining £4.8bn asset portfolio.

Legal & General CEO Nigel Wilson said: “The Rolls-Royce transaction again demonstrates our extensive strengths and synergies. We have a unique combination of pension, actuarial and structuring expertise coupled with the capacity to create and source long-term direct investments at scale.

“The global PRT opportunity remains sizeable and compelling: only 8% of the £2.2 trillion of UK DB pension liabilities and 5% of the $3.5 trillion in the US have completed PRT. Our pipeline and appetite for further transactions in H2 remains strong.”

In aggregate, Legal & General has transacted more than £6.2bn of global PRT year to date.