UK - UK-based insurer Royal & Sun Alliance has reported a deficit on the group’s pension schemes of £262m (€293.3m) at the end of December 2009, which it mainly attributed to the impact of the de-risking of the UK schemes with longevity swaps in July last year.

Figures included in the 2009 results from the firm showed the funding position of the insurance firm’s pension schemes moved from a surplus of £363m in December 2008 to a deficit of £262m.

RSA said the decision to protect against longevity and market risk for around one-third of the UK schemes’ liabilities in July 2009 had significantly reduced the sensitivity of the pension scheme. (See earlier IPE article: Unusual market conditions sparked RSA longevity deal)

But it stated this change in sensitivity, combined with changes in assumptions relating to discount rates, inflation and mortality, meant the impact of the de-risking on the surplus had reduced from the expected £361m to £224m.

Despite reporting an overall deficit at the end of the year, RSA confirmed it is taking further action to de-risk its schemes, following the switch from a final salary to career average scheme in Ireland.

It noted that this month it is making “further significant changes to the UK DB schemes including, reducing the future rate of pension accrual from 60ths and giving employees the choice of 80ths or 100ths, increasing the level of existing employee contributions, reducing the cap on pensionable earnings to £75,000 and raising the schemes’ retirement age from 62 to 65”.

In the investor presentation, George Culmer, chief financial officer at RSA, said these changes will “reduce the growth of the future liabilities of the schemes and cut the annual cost”.

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