RSA, the UK’s largest commercial insurer, has taken out a £1.9 billion policy with Goldman Sachs against the risks of paying pensions to more than half of its 15,000 former employees if they live longer than expected.

The deal, struck with Rothesay Life, Goldman’s specialist insurer, is the largest example of a so-called “pensions buy-in” yet seen in Britain. It insures RSA’s pension payments to about 55 per cent of its former workforce against the risk that retiring employees will live far longer than expected. The deal also covers RSA against the risk of market fluctuations and changes in interest rates.

RSA is the latest UK company to take radical steps to reduce the risks of providing pension arrangements for staff based on their final salary at retirement. Companies such as Barclays, BP and the UK division of IBM, the technology business, have closed their final-salary schemes to new or, in some cases, existing members in an effort to cut costs as falling markets and a longer lifespan for staff erodes their assets and pushes up their liabilities.

RSA has already shut its £5.7 billion final-salary pension scheme to new joiners, diluted pension payments to retiring employees and sold out of £900 million of risky equity investments. Only about 4,000 staff pay into RSA’s pension scheme, adding to the problem of funding the insurer’s retirement obligations.

The deal with Goldmans means that RSA will not have to increase payments into its scheme, which last year totalled £36 million. RSA pensioners’ rights remain intact under the deal, the company said. Andy Haste, RSA’s chief executive, would not comment on the cost of buying the insurance policy, which is in place until the last of its pensioners dies. However, he indicated that the ultimate cost would be minimal.

This is because — as part of yesterday’s deal — Goldman and RSA carried out an asset swap, where RSA gave the bank short-dated UK government bonds, or gilts, in exchange for higher-yielding similar assets with a longer maturity. The increased return was then used to part-pay for the insurance policy.

News of the RSA deal came as the Pension Protection Fund (PPF), the government-created pensions lifeboat, said yesterday that the collective shortfall in UK final-salary pension schemes widened from £196.8 billion in May to £215.8 billion in June.

At the same point last year, the deficit in the 7,400 final-salary schemes surveyed by the PPF stood at £60.3 billion, underscoring the slide in investment markets over the past 12 months.

The RSA deal tops last September’s transfer by Cable & Wireless, the telecoms group, of £1 billion of its pension liabilities to Prudential.

Under the terms of the RSA policy, Rothesay receives a monthly premium in exchange for assuming part of the insurer’s pension liabilities.

The deal seals Rothesay’s position within the growing market for the transfer of pensions risk. Last year, Rothesay struck its first deal to buy the £700 million pension scheme of Rank, the casino and gaming operator.

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