Engine maker Rolls-Royce has offloaded a £4.6 billion chunk of its pension scheme covering 33,000 members to Legal & General, in the biggest deal of its kind in the UK.
The record-breaking pension buy-out sees L&G take on around a third of Rolls-Royce’s total pension scheme assets.
Rolls – whose scheme covers 76,000 pensioners in total – said the remaining pension assets will be “smaller with less risk” for the group and the pension trustees to manage in the future.
Joel Griffin, head of global pensions and benefits at Rolls-Royce, 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.”
Rolls will pay L&G around £30 million in cash as part of the deal.
As well as the transfer of around £4.6 billion of assets, it will also offload £4.1 billion of liabilities to L&G.
Rolls agreed a pensions deal with trade unions last May to keep its final salary pension scheme open to existing members until 2024 and to boost benefits to younger workers from 2021.
The move is set to save the group £145 million over the next three years.
L&G said it has now completed more than £6 billion of company pension buyouts in 2019 alone as companies look to offload mounting liabilities of their employee retirement funds.
The life and pension giant uses its funds to invest in major UK projects, such as housing developments and offshore wind farms.
Laura Mason, chief executive of Legal & General institutional retirement said: “The scale of the transaction provides further opportunities for us to invest directly in the UK economy and make a positive difference in our towns and local communities.”