ROYAL & Sun Alliance (RSA) yesterday insured itself against potential increases in the cost of funding one third of its staff pensions scheme.<br /><br />The insurance deal, arranged by investment bank Goldman Sachs subsidiary Rothesay Life, is set to deliver a “small” earnings boost from 2010, but will have no impact on earnings this year, RSA said. Transaction costs were not disclosed.<br /><br />RSA, best known for its “More Than” motor and home insurance business, said the move would eliminate the risk of increased cash funding on £1.9bn of its pension liabilities.<br /><br />This action covers around one third of the group’s total UK pension scheme liabilities and over 55 per cent of the liabilities relating to pensioners currently receiving payments.<br /><br />Andy Haste, RSA’s chief executive, said: “We are pleased to have worked with the trustees to deliver a strong solution, which takes advantage of market conditions. Following the action taken in previous years, the schemes were strongly positioned to achieve this next step with such solid security.”<br /><br />Under the terms of the policy, RSA retains ownership of the funds’ assets, which are invested in a low-risk portfolio of gilts and government bonds.<br /><br />RSA says the deal is similar to a bulk purchase buy-in annuity contract but with “significantly enhanced security”. Buy-in contracts transfer pension liabilities from a company to a specialist insurer.<br /><br />Rothesay Life said the deal “is structured as an insurance contract covering the liabilities, under which the trustees retain ownership of the assets, comprising gilts and UK government guaranteed bonds. This arrangement provides a high degree of security for the schemes.”<br /><br />“This transaction further de-risks the impact of the UK pension schemes on the group’s results and balance sheet,” said Haste.<br /><br />The latest move follows other measures designed to cut risk, such as closing its defined benefit schemes to new members and introducing employee contributions.