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."