Table of Contents

• EDITOR’S RAMBLE 🗣

• FEATURED REPORT 📰

• IN OTHER NEWS 🗞

• AROUND THE WEB 🌐

• STUFF THAT MIGHT HELP YOU 👌

EDITOR’S RAMBLE 🗣

I saw something cool on LinkedIn yesterday.

The US law firm Willkie is teaming up with The Corporate Law Academy to run their first-ever Open Day in September.

You’ll get to:

• hear from lawyers across private equity, finance and litigation,

• chat to trainees about the realities of working there, and

• network with people across the firm.

So, if you’re interested, you can apply here now.

– Idin

FEATURED REPORT 📰

🤝 Why Rolls-Royce offloaded £4.3 billion in pensions

What’s going on here?

Rolls-Royce (the British car maker) has handed over £4.3 billion of its UK pension obligations to Pension Insurance Corporation (PIC). That means PIC — a specialist insurer — is now responsible for paying pensions to thousands of former Rolls-Royce employees.

This move is called a pension risk transfer.

What is a pension?

Let’s get back to basics for a second. A pension is a promise from your employer (or former employer) to pay you a steady income after you retire.

There are two main types:

1️⃣ Defined contribution (DC): Think of this like a retirement piggy bank. You and your employer both put money into an account.

That money gets invested and (hopefully) grows. Then you draw from it when you retire. If that money runs out when you’re drawing from it — bad luck for you.

Most modern workplace pensions are DC because they’re way less risky for employers than the other type of pension (you’ll see why in a second).

2️⃣ Defined benefit (DB): You pay into a shared pension pot. But regardless of how much is in the pot, your employer promises to pay you a set income for life after you retire. The amount is usually based on your salary and how long you worked there.

It’s predictable for employees but more risky for employers — because they have to keep paying the promised amount, no matter how much is in the pot or how long people live.

That’s why most companies don’t offer them today.

But many, like Rolls-Royce, still manage large DB schemes from the past.

What is a pension risk transfer?

For a company, a defined benefit pension is a huge financial obligation — they’re on the hook to keep paying people, often for decades.

That means dealing with a load of uncertainty:

• Will the pension fund’s investments do well enough?

• Will people live longer than expected and need more payments?

• Will interest rates fall, making it harder to earn enough investment returns to cover future pension payments?

A pension risk transfer is how companies get out of that long-term commitment. They pay an insurer — like PIC — a large upfront sum, and in return, the insurer agrees to take over the responsibility of paying the pensions.

From that point on, it’s the insurer who manages the risks. If costs rise — because the pension members live well into their 90s — that’s on them. If the fund does well, the insurer keeps any profits they make.

Meanwhile, the company (in this case Rolls Royce) can walk away from this massive liability.

Why do companies like Rolls-Royce transfer their pension risk?

Defined benefit pensions can feel like financial time bombs for companies. Even if everything’s running smoothly today, they’re legally responsible for making every payment in full, for decades — no matter what the future holds.

Here’s what makes that risky:

• ⌛️ Longevity risk: If pension members live longer than expected, the pension scheme has to keep paying out for more years — which costs more.

• 💷 Investment risk: The pension pot is invested. If those investments fall short, the company has to plug the gap.

• 📄 Balance sheet risk: These pensions sit on the company’s balance sheet as long-term liabilities. That can make the company look riskier to investors and lenders, pushing up borrowing costs.

By transferring the scheme to PIC, Rolls-Royce offloads all of those risks — and the legal responsibility that comes with them.

Which law firms worked on the deal?

Hogan Lovells advised Rolls-Royce. Addleshaw Goddard acted for PIC.

Hogan Lovells (for Rolls-Royce) helped structure the risk transfer and negotiate the terms under which PIC would take on the pension liabilities.

This involved drafting the “bulk annuity contract” — the legal agreement that transfers the responsibility for paying the pensions from Rolls-Royce to PIC.

They also negotiated a set of warranties in the document to protect Rolls-Royce. Warranties are legal promises about the accuracy of the information Rolls-Royce gave PIC (for example, about the value of the assets or the number of members in the scheme).

Hogan Lovells also handled compliance with regulatory rules, especially from The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA). Since Rolls-Royce is a public company, lawyers would have advised on how to communicate the deal to shareholders and the market — making sure it was explained accurately.

Addleshaw Goddard (for PIC) focused on due diligence.

That means going through the scheme’s legal documents — checking whether the pension rules were clear, whether past payments were made correctly, and whether any members might have legal claims the insurer could inherit. They want to make sure their client isn’t taking on issues it didn’t know about.

They also reviewed the assets being transferred to PIC — to make sure they were the right ones, properly valued, and could legally be moved.

Their job was to make sure PIC only took on the risks it agreed to — and was legally protected from any nasty surprises.

How can you use this in your applications?

From this story, there are two key points you may be able to apply in your applications or assessment centres.

📈 1. The private equity trend: The Rolls-Royce deal isn’t just a pension transfer — it’s a private equity-backed transaction. The insurer, PIC, is owned by Apollo Global Management, one of the world’s biggest private equity firms.

And this isn’t a one-off.

More private equity firms are buying insurance companies that take over pension schemes from employers.

That’s because, despite the risks, DB pensions come with large pots of money built up over decades. Once an insurer takes them on, that capital can be invested — and that’s what attracts private equity.

Other recent examples include Brookfield’s £2.4 billion acquisition of Just Group and Rothesay’s buy-out of Scottish Widows’ £6 billion annuity portfolio (Rothesay is backed by PE funds Blackstone and GIC).

🔍️ 2. The due diligence angle: Defined benefit (DB) pensions, like Rolls-Royce’s, can be a major liability in M&A deals.

That’s because you don’t want to accidentally buy a company that has a DB pension scheme. They create long-term obligations that can affect a company’s value and future cash flow.

So, in a real transaction, a buyer might want to know the size of any DB scheme. If it’s large enough, they may adjust the price they’d offer for the company.

In a case study or interview scenario, spotting that a target company has a DB pension — and flagging it as a risk — shows the firm you understand how liabilities affect deal terms, pricing, and negotiation strategy.

IN OTHER NEWS 🗞

• 💷 The Bank of England has cut interest rates to 4% — the lowest in over two years. The decision was so close it needed a second round of voting, a first since 1997. Inflation in June was 3.6%, above the 2% target, and concerns over an economic slowdown swayed many to back the cut. While more cuts are possible this year, the Bank says there are still risks on both sides.

• 🎓 The SRA is giving £360,000 to 11 organisations to help disadvantaged SQE candidates with their exam fees. The money was collected from fines on SQE provider Kaplan. Up to 190 people could sit their first exam by January 2026, with each group running its own selection process to boost diversity by removing financial barriers.

• 🍽️ Latham & Watkins and CMS advised on L Catterton’s first investment in Dishoom, valuing the restaurant group at around £300 million. Dishoom will use the funds to grow in the UK and open its first US site in New York in 2026. L Catterton is the brand’s first outside investor since its 2010 launch. Dishoom has 10 UK sites and reported £116 million in revenue in its last public results.

AROUND THE WEB 🌐

• 🎓 Smart: A record number of 18-year-olds will get into their first choice university this year

• 🐟 Splash: Draw a fish or feed the ones there (shift + click)

• 🏖️ Wholesome: A man and his sons built 200+ intricate sand creations in Dorset 👇️ 

  

STUFF THAT MIGHT HELP YOU 👌

• 📹️ Free application help: If you're applying to commercial law firms, check out my YouTube channel for actionable tips and an insight into the lifestyle of a commercial lawyer in London.