The Journey from Rolls Royce to Athora

Rolls Royce Severs its DB Pension Scheme

Were Better Outcomes Available?

Rolls Royce is severing its connection with its DB pension scheme. It says it simplifies the Group and its investment proposition. The trustees are winding up the scheme and handing it over to the still Bermudan based Athora. Athora was in 2026 purchaser of Pension Insurance Corporation who in 2025 completed a scheme buy-in. Athora will hand out annuities to members.

The member perspective is distilled in the following table of “I had; I have; I will have”.

The explanatory letter sent to members in 2025 on the buy-in with PIC is a masterclass in how to gloss over difficult subjects. It comes across as if it was written before Solvency UK took hold; offshore reinsurance changed life insurer economics and North American private capital alighted on UK pension liabilities. That Rolls Royce’s chosen insurer was subject of a bid has no reference. The letter tries to explain away surpluses and strong funding rather than even suggest that there could be scope to exercise discretion to make additional payments and address inflation protection. In respect of “peace of mind” or member experience including added discretionary value sharing payments there is nothing included.

Rolls-Royce is another story where better outcomes were available. The long years of derisking; the LDI over-hedged position when interest rates increased; the misjudged longevity transfers will have depleted sponsor commitment to the scheme. Get rid ASAP prevailed. The Rolls-Royce Pension Scheme History below provides some perspective on the progress of the scheme.

Change is coming. Government has promised more coordination between regulators and to support “informed decisions” by trustees and sponsors. Government now require schemes and their advisors to consider Credible Alternatives to buyout. How the Rolls Royce conclusion was reached that BPA provided the best option might be subject to scrutiny – but actuarial work is all but scrutiny free, as three major Government reports have highlighted.

There is still over £1 trillion in DB schemes. Outcomes can be devised which can be better than providing cheap, long term finance to North American private debt originators.

Government charging for the regulation and assumed back up used to market annuities is reasonable. The approach can encourage higher UK asset allocation and incentivising schemes running-on to share value created can bring practical, immediate benefits.

Rolls-Royce Pension Scheme Member Perspective

More or Less “Peace of Mind” in Severance

I Had	I Have	I Will Have
Rolls-Royce as sponsor. It was / is my employer (£100 billion market capitalisation business and an A- debt rating)	Rolls-Royce as sponsor with PPF back up. Insurer buy-in policy in place.	Individual annuity from Athora. (Athora registered in Bermuda until end 2027. It is valued at circa £13 billion. It is an affiliate of Apollo Global. Took over PIC in £6 billion deal approved in 2026)
Trustees / admin teams with scheme specific knowledge and appreciation of personnel. Trustees: Member First approach.	Trustees still responsible but with whole scheme buy-in policy (agreed with PIC, now owned by Athora)	No collective back-up from trustees after scheme wound up.
Scope for discretionary payments given surpluses and Government rule changes.	Limited possible payment on scheme wind up.	No discretionary powers left for added inflation cover or other upside.
High quality PPF back up. It now covers all pensions with up to 2.5% inflation (PPF has big surplus and is well run)	Buy-in policy covered by FSCS in addition to PPF. Limited benefit upside still possible on wind up.	FSCS safety net. (FSCS back up is not Government guaranteed. It has the concentration and systemic risk of a sector style bail out scheme. No stop loss of PPF.)

Trustee rationale for the move to buyout was “greatly reducing” both investment risk to funding and reducing geopolitical risks.

After buyout, the investments will have the higher investment risks allowed by PRA rather than those by TPR. Athora is a Bermudan registered entity. It has promised to move to London. Funded reinsurance and Solvency Triggered Termination Rights suggest PRA is stretched to manage its booming Pension Risk Transfer market. Severance with buyout means the tough regulatory control TPR has over Rolls-Royce and scheme trustees is lost. Annuitisation creates new member vulnerabilities which FCA should consider ahead of buyouts replacing buy-ins. FSCS is a life insurer scheme with no Government guarantee and no dedicated resources. It can be subject to political change.

Investment and political risks for members may in reality have increased.

“Security” for a buyout does not involve the annuity provider holder agreeing standard security financial features for a long term loan – third party contractual security; collateral; restrictions of transferability; acceleration clauses if risk of default increases.