The Rolls Royce defined benefit (DB) pension scheme deficit has fallen by £849m to £208m, the group's financial report has shown.

This was primarily driven by a £4.6bn bulk annuity deal with Legal & General completed in June of last year.

The transfer process for 90 per cent of the buy-in liabilities was completed on 1 December 2019, which in turn saw £3.6bn of pension assets and liabilities derecognised from the groups balance sheet.

The remaining 10 per cent of the buy-in liabilities were transferred in January, which will see a further £408m in pension assets and liabilities derecognised in 2020.

Rolls Royce also paid £220m into its’ DB schemes throughout 2019, and expects to contribute a further £170m in 2020.

The results noted changes in financial and demographic assumptions that had also contributed to the fall in the overall scheme surplus, with an actuarial loss of £1,496m, including an asset re-measurement net loss estimated at £600m, which occurred as a result of the buy-in process.

However, the group also saw a drop in service costs and administrative expenses, spending £164m on its’ UK schemes, and a further £52m on overseas schemes, a drop from last years total spending of £241m.

Rolls Royce has also confirmed that a consultation with active managers in the UK scheme was completed in January, agreeing “certain changes” for future accrual for the relevant manager group that will mitigate future funding cost increases.

The accounting impact of this change is expected to be reflected in 2020 however, with a triennial valuation for the UK scheme due at 31 March 2020.

Commenting on the results, Rolls Royce chief executive, Warren East, stated: "After a challenging first half, we had a good end to 2019, delivering 25 per cent growth in full year underlying operating profit and an encouraging level of free cash flow.

"Our restructuring efforts gained momentum, with run-rate cost savings of £269m".

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