Transaction helps scheme manage impact of longevity risk
Rolls-Royce and the Trustees of the Rolls-Royce Pension Fund have agreed a longevity swap that will give additional security to all members of the company’s final salary pension scheme. The contract with Deutsche Bank reduces the risk on approximately £3bn of the fund’s liabilities. The cost of this transaction will be borne by the pension fund and will have no material effect on the funding arrangements. Around 37,000 pensioners are covered by this agreement.
The longevity deal is the latest measure implemented as part of the long-term strategy to manage the risks and uncertainties associated with the scheme. Mercer advised the Trustee of the Fund on the investment implications of the transaction, including the interaction with the existing liability hedging arrangements and the overall impact on the plan's risk position. Aon Hewitt was lead adviser on the transaction.
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