Rolls-Royce hedges against increased life expectancy

Rolls-Royce, the trustees of the engine-maker's pension fund and Deutsche Bank have got together to agree a deal that will reduce the risk on around £3bn of the fund's liabilities.

The parties have agreed to a "longevity swap" deal after agreeing on an average life expectancy for the pension scheme's 37,000-or-so members.

If pensioners live beyond the agreed average age of expected death, Deutsche Bank will make payments to the fund to offset the additional cost of paying pensions. If the reverse applies, the cost of paying pensions will be reduced but the fund will be required to make payments to the bank. This arrangement enables future liabilities to be predicted with more certainty, a statement said.

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"We have made sure that as our pensioners live longer in retirement we have made proper provision for them," said Rolls-Royce's finance director, Andrew Shilston.

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