Prudential has agreed a £1 billion deal, which will see it guarantee the future pensions payments of 5,000 former Cable & Wireless employees.

Under the arrangement, the telecoms group has agreed to transfer the future liabilities of its final salary pensions funds to the insurance giant, which looks set to benefit from a premium income of around £100 million a year.

In addition, it has been confirmed that half of the fund's £2 billion worth of assets will be sold off in order to purchase a bulk annuity from Prudential, allowing it to meet the original pensions commitments to the retired workers.

Commenting on the deal, Tony Rice, finance director of C&W, said: "The transaction materially reduces the fund's exposure to liabilities by over £1bn.

"It also materially reduces the fund's and shareholders' exposure to the future risk of adverse changes in actuarial assumptions and investment returns."

It is also believed that Prudential is currently working on a number of similar deals with other companies as UK firms increasingly look to offload their pensions liabilities.