Yahoo Finance Rolls-Royce to offload Vickers pensions with £1bn L&G deal
Rolls-Royce Holdings, the most prestigious name in British manufacturing, has struck a £1bn-plus deal to offload a chunk of its pension liabilities as it continues a wide-ranging restructuring under its new chief executive.
Sky News has learnt that Rolls-Royce has agreed to a transaction under which Legal & General (LSE: LGEN.L - news) (L&G) will take on responsibility for paying the retirement benefits of approximately 10,000 current and former employees.
The affected workers, who are expected to be informed about the changes this week, belonged to a defined benefit pension scheme run by Vickers, a marine propulsion specialist taken over by Rolls-Royce in 1999.
The £576m deal was at that point the largest acquisition in Rolls-Royce's history.
The decision to offload the Vickers scheme to L&G will include a guarantee to pay the accrued pension pots of the members, and reflects a growing trend for such buyout deals involving major companies.
L&G has established one of the largest pension risk transfer operations in the UK, competing with the likes of Rothesay Life and Pension Insurance Corporation.
Among the other corporate giants with which it has struck similar deals were ICI, the chemicals giant, and the automotive supplier TRW.
L&G's agreement with Rolls-Royce comes weeks after the engineering group, which is recovering from a string of profit warnings under its former boss, announced the consolidation of its other defined benefit schemes into one.
Warren East, who was parachuted in as its chief executive last year, has shaken up Rolls-Royce's management and announced heavy job cuts.
The move enabled it to boost benefits for 86,000 members by virtue of the newly combined scheme's £1bn surplus.
The company had hedged against interest rate cuts, insulating it from many of the headwinds confronting thousands of other defined benefit scheme providers.
Declines in gilt yields following the vote to leave the European Union have brought the issue into sharp focus for many retirement scheme sponsors.
The Financial Times last month quoted Joel Griffin, Rolls-Royce's head of pensions and benefits, as saying that "Brexit hasn't hurt us at all."
Rolls-Royce and L&G declined to comment on Wednesday.
