Royal & Sun slashes pensions gap

Royal & Sun's staff backed the pension changes

Royal & Sun Alliance (RSA) staff have accepted a new, cheaper retirement plan that will cut the firm's pensions deficit by nearly a quarter.

The UK insurer has switched to a cheaper pension scheme based on average career earnings rather than a person's final salary.

Royal & Sun said this move would cut £126m ($395m) after tax from its £503m pension deficit.

Its shares closed 1.7% up at 89 pence as investors cheered the news.

RSA said the new scheme will come into effect next year.

In May, RSA revealed that pre-tax profits had more than trebled in the first three months of the year to £185m, up from £53m.

Last month, City financier Andrew Regan said he was considering launching a takeover bid for the insurer.

Corvus Capital, an investment vehicle controlled by Mr Regan, announced it was in the early stages of considering an offer for the insurance giant.

The prospect of a takeover bid has also contributed to strengthening the insurer's share price.