Friends Provident will transfer 200 staff to IBM and its partners as part of a 10-year IT and infrastructure outsourcing deal.

The life and pension firm expects the move will generate initial cost savings of £6 million a year as it looks for group savings of £40 million by the end of 2009. In January, Friends announced plans for 600 job losses.

Trevor Matthews, CEO of Friends Provident, said, "I am delighted to be entering into this contract with IBM at this very important time in the rebuilding program for Friends Provident. This is a big step forward in achieving our targeted £40 million of annual cost savings by the end of 2009. The cost savings we will realize under this contract will help to make Friends Provident a leaner, fitter and more efficient business without compromising the market leading levels of service we are renowned for. By partnering with IBM, one of the world's leading technology providers, we will gain access to the latest processing power and the expertise to improve our service and technology further. It sets us up very well for the future and is further evidence of the forward progress we are making."