Rolls-Royce pledged £500 million towards tackling its pensions deficit today in return for the agreement of workers to close the schemes to new members.
The jet engines maker will also increase the level of contributions as part of attempts to reduce a deficit that stood at £1.28 billion at the end of last year.
The proposals were revealed by Rolls today at the start of round of consultations with representatives of its three UK pensions funds. Two of the three schemes are still open to new members.
Rolls said the moves addressed the shortfall as well as offering "secure, competitive and affordable pension arrangements for the group and all its members".
Rolls said its one-off contribution of £500 million also depended on a change of investment strategy to achieve a better match between assets and liabilities. It did not provide further details.
The company has one of the UK's largest pensions deficits, even though it secured agreement to reduce the deficit of the main scheme - the Rolls Royce Pension Fund - by £567 million in 2003. That scheme was closed to new members in 1999.
There are two other schemes - the Rolls-Royce Group Pension Scheme and the Vickers Group Pension Scheme. There are currently 60,493 pensioners out of total membership of the three schemes of 119,054.
The company recently said pre-tax profits jumped 49% on a like-for-like basis to £584 million in 2005, following continued strong growth in its after-sales services arm. Its shares have been among the best performing in the FTSE 100 Index.
At the same time as announcing its results in February, Rolls said it was looking at ways to tackle the pension deficit, which rose 15% last year.
Many companies have switched new members from final salary schemes into less generous defined contribution ones.
Under final salary schemes workers receive a proportion of the salary they are paid immediately before they retire for every year they have been a member of the scheme.
But under defined contribution schemes companies only guarantee how much they will pay into a worker's pension and not what it will be worth when they retire, leaving them having to shoulder investment risk and buy an annuity when they stop working.
Rolls has sites around the UK, including at Derby, Bristol and Glasgow.