US manufacturer United Technologies Corp (UTC) (www.utc.com/Pages/Home.aspx) is reducing its pension liabilities by $1.77 billion through the “transfer of obligations” to insurer Prudential Financial Inc and a plan to offer lump-sum pay-outs to around 10,000 retirees.

UTC said it expects to take a pre-tax settlement charge of about $400-$530 million in the fourth quarter.
CEO Gregory Hayes said: “Older industrial companies have found retiree obligations increasingly burdensome, partly because of longer life-spans and also because low interest rates reduce the income that can be earned on funds set aside to back the commitments. Pension costs are probably the biggest single issue we have today.

“This transaction is an important part of our long-term strategy to reduce future pension risk and expense. It will not affect participants remaining in the plans and entrusts the assets, leaving the plans to a highly rated insurance company whose core business is retirement security and the administration of pension benefits.”

Newark-based Prudential, the second-largest US life insurer, has taken on some of the biggest pension transfers, sealing deals with companies including General Motors and Verizon Communications Inc.