Defined Contribution

Rolls-Royce launches new DC plan

Updated with correction.

Rolls-Royce Holdings PLC, London, introduced a new defined contribution plan after the aircraft engine and power systems manufacturer reached an agreement with U.K. trade unions on a three-year benefits package, a spokeswoman said.

A simplified DC plan for all employees who joined Rolls-Royce after 2007 replaces seven other DC arrangements, the spokeswoman added. Beginning in 2021, the company plans to increase its employer contributions to the DC plan to 12% from an average of 5%. The company's total DC assets could not be learned.

Separately, Rolls-Royce will maintain its 13 billion ($18 billion) defined benefit plan for current active participants until at least Jan. 1, 2024, pending future consultations. However, the company will reduce its pension contributions by 145 million total over the next three years. In 2018, Rolls-Royce intends to contribute 115 million into the pension fund, the spokeswoman confirmed.

"We are reducing contributions to the defined benefit fund over the next three years as a result of the fund being in a surplus of 1.4 billion. Existing participants will continue to accrue benefits until Jan. 1 2024," the spokeswoman said.

The pension fund was closed to new participants in 2007. As at Sept. 30, 2017, the plan was 113% funded.

Joel Griffin, head of global pensions and benefits, said in an emailed comment: "The agreement we've reached will give greater financial stability to Rolls-Royce and our people. It simplifies our pension arrangements and helps us to keep our defined benefit fund going, at a time when more and more companies are fully closing theirs. It will also meaningfully improve retirement prospects for younger Rolls-Royce employees, helping them to be better prepared for the future."