Yahoo Finance Rolls-Royce aiming to shut pension plan four years early to ease Covid pressure
Rolls-Royce is preparing to close its final salary pension scheme four years early to conserve cash as grounded aircraft pile pressure on its finances.
The jet engine maker is seeking to end accrual of future benefits now, rather than in 2024.
If Rolls gets the go-ahead from pension members and trustees following a consultation, it is likely to save a total of about £500m in contributions. Under the current arrangements, in the last financial year Rolls made total cash contributions to the pension scheme of more than £150m.
Cutting payments to the scheme will ease the pressure on Rolls, which has seen demand for its engines and servicing of them collapse.
Thursday’s trading update will detail the impact of the pandemic, with analysts forecasting flying hours on its engines could be down by 70pc this year, causing a £3bn cash outflow. Rolls is shedding 9,000 of its 52,000 global employees and has cracked down on all non-essential spending as it battles to survive. Demand for its services is not expected to return to pre-Covid levels until 2025.
The company is also considering the possibility of an equity rise or asset sales. This could include disposing of its Spanish business ITP Aero, which was the subject of a failed sale to Indra last summer.
Rolls closed its lavish final-salary retirement scheme to new members in 2007, but still has almost 10,000 staff who are still paying into the plan.
It has a further 19,000 deferred members who have left the business but are not drawing a pension, and 13,000 retirees who are drawing down.
The fund had a £208m deficit, down by £849m on last time round, after a £4.6bn buyout of part of the scheme last year by Legal & General.
A Rolls spokesman said: “The impact of Covid-19 is unprecedented. We must reduce our cost base and protect the future of Rolls-Royce for all our stakeholders.
“As a result, we are beginning consultation with active members and employee representatives on a proposal to stop the build-up of any further benefits in our final-salary pension scheme, before the end of 2020.
“Neither existing benefits accrued by active members to date, or payments to current pensioners, will be affected.”
