Rolls-Royce in biggest buyout of 2016

Close up of the nose cowl of a Rolls Royce jet engine turbine intake.

Rolls-Royce has completed a £1.1bn buyout for the Vickers Group pension scheme with Legal & General, in the biggest deal in 2016 to date.

Mercer advised the trustees on the deal, which it described as taking place against a backdrop of ‘harsh’ economic conditions. The deal means 11,000 scheme members will now receive their pension payments from L&G.

Legal & General Investment Management (LGIM) manages around £12bn of assets for Rolls-Royce. L&G says the trustees’ approach to derisking to date has been key in enabling it to achieve full buyout.

L&G head of core pension risk transfer Phill Beach says: “This is a significant transaction which demonstrates that with strong company backing and a trustee who manages risk well the objective of buyout is fully achievable even when markets appear volatile.”

L&G Retirement managing director Kerrigan Procter says: “Our relationship with the trustees has been a long-standing one, starting in 2007 with an LDI mandate to de-risk the scheme and now culminating in a full buyout. We are grateful for being able to play a part as the trustees, with patient and careful management, steered their way through the financial crisis, recession, the consequences of QE and latterly the outcome of the EU referendum before reaching the point where buyout was appropriate and achievable for all scheme members.”

Rolls-Royce head of pensions Joel Griffin says: “This is a great testimony to the work of the Trustees, their advisers and the Company who have worked collaboratively over many years to ensure that this scheme is well funded with a prudent investment strategy.”

Mercer UK leader, bulk pensions insurance advisory David Ellis says: “Mercer is delighted to have helped the trustee complete this major transaction, despite seemingly harsh financial conditions. It is a great demonstration of the excellent results that can be achieved by taking a holistic view of pension scheme risk and having the confidence to push for the full desired outcome”