The transfer of assets and liabilities to L&G relates to roughly 33,000 pensioners and will reduce Rolls Royce’s post-retirement obligations by around £4.1bn, the FTSE 100-listed group said in a statement on Thursday.
Rolls-Royce will pay a one-off cash contribution of around £30mln but said its free cash flow guidance for the full year remains unchanged.
Having now made four of the UK’s five largest pension risk transfer (PRT) deals, Legal & General chief executive Nigel Wilson said the Rolls-Royce transaction “again demonstrates our extensive strengths and synergies”.
He said the global PRT opportunity “remains sizeable and compelling”, noting that only 8% of the £2.2trn worth of UK defined benefit pension liabilities and 5% of the $3.5trn in the US have completed PRTs.
“Our pipeline and appetite for further transactions in H2 remains strong,” Wilson added.
Rolls-Royce finance chief Stephen Daintith said the deal “represents another step on our journey to simplify, de-risk and strengthen the company” and was a “further step towards ensuring benefits for our pensioners”.